How did the world hand over electric cars and the auto industry to China? Your first thoughts are obvious. It seems impossible, since there were generous countries offering government subsidies to support for lithium batteries for electric cars and lower costs. You may be surprised to see how China managed to take over the car market and become the world-leaders in electric vehicles.

Most people have not realized the extent of what has happening, China became a world leader in making and buying electric vehicles. All this happened In just the past two years, when the number of EVs sold annually in the China grew from 1.3 million to a whopping 6.8 million, making 2022 the eighth consecutive year in which China was the world’s largest market for EVs. For comparison, the U.S. only sold about 800,000 EVs in 2022.

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The more than 6 million EVs sold in China in 2022 accounted for over half of global EV sales.
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What does this mean? China is well on its way to becoming one of the world’s leaders in climate policy and taking over the electric car industry, and eventually the auto industry. How exactly did China manage to pull this off, and why is it important to you?

As a result of generous government subsidies, tax breaks, procurement contracts, and other policy incentives, China has created multiple EV brands that have emerged and continued to optimize their new technologies, so they can meet the real-life needs of Chinese consumers. The U.S. and other countries have done the same to increase interest and sales for electric vehicles. Some countries and states have mandated all electric vehicles by 2030.

China was on the forefront and an early investor in electric vehicles. In the early 2000s, before it fully ventured into the field of EVs, China’s car industry was in an awkward position. It was a powerhouse in manufacturing traditional internal-combustion cars, but there were no domestic brands that could one day rival the foreign makers dominating this market.

China realized that it would never overtake the U.S., German, and Japanese legacy automakers on internal-combustion engine and hybrid vehicles. This pushed the Chinese government to invest in completely new territory: cars powered entirely by batteries. The risks were extremely high; at that point, EVs were only niche vehicles made by brands like General Motors or Toyota, which usually discontinued them after just a few years. But the potential reward was a big one: an edge for China in what could be a significant slice of the auto industry.

Another benefit for China — EVs had the potential to solve several other major problems, like curbing its severe air pollution, reducing its reliance on imported oil, and helping to rebuild the economy after the 2008 financial crisis. It seemed like a win-win for Beijing.

The Chinese government took steps to invest in related technologies as early as 2001; that year, EV technology was introduced as a priority science research project in China’s Five-Year Plan, the country’s highest-level economic blueprint.

In 2007, the industry got a significant boost when Wan Gang, an auto engineer who had worked for Audi in Germany for a decade, became China’s minister of science and technology. Wan had been a big fan of EVs and tested Tesla’s first EV model, the Roadster, in 2008. Wan is credited with making the national decision to go all-in on electric vehicles.

From 2009 to 2022, the government poured over $29 billion into relevant subsidies and tax breaks. The subsidy policy officially ended at the end of last year and was replaced by a more market-oriented system called “dual credits,” it had already had its intended effect: the more than 6 million EVs sold in China in 2022 accounted for over half of global EV sales.

The most important part of an electric vehicle is the battery cells, which can make up about 40% of the cost of a vehicle. China has also had one key advantage in battery manufacturing: it controls a lot of the necessary materials. Securing mines globally was a critical part of this plan and that has brought the Chinese EV battery companies as leaders in the industry.

More than 70% of the critical materials like cobalt, nickel sulfate, lithium hydroxide, and graphite are controlled by China. The nation has the ultimate control of the sector, which China has clearly pursued for years well before others companies even figured that this was something important. Chinese-made EV batteries are not only available at a discount but also are available in much higher quantities because the manufacturing capacity has been built out in China. However, this makes other car companies beholden to China, which controls the bulk of the supply chain for batteries.

The result is there are a slew of Chinese-built vehicles including BYD, SAIC-GM-Wuling, Geely, Nio, Xpeng, LiAuto and many startups. Chinese EV companies feel they have a chance to expand outside of China to become global brands. Some of them are already entering the European market and even considering coming to the U.S.

If other wish to build their vehicles in China, they must partner with the Chinese government and give up 50% ownership. This gives China access to more technology, and these companies must even use China batteries, even Tesla,

With other factors in play, electric grid issues and geo-politics, China was able to increase their EV sales by 120%, and wants to control the auto industry and its supply chain.

There is so much more to discuss on this, put your comments below and let’s start the conversation.

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