China’s EV Dream Ends?

Paresh Jadhav

11 months ago

At first glance, China’s electric vehicle (EV) market seems poised for expansion. After all, Chinese authorities have invested significantly in this technology through subsidies, tax breaks and procurement contracts. But these promises have yet to bear fruit.

Chinese manufacturers have taken great strides forward by offering consumers affordable electric models, increasing consumer demand and competing directly against Tesla while expanding into foreign markets.

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China’s EV Dream Ends?

China’s electric vehicle (EV) industry has seen rapid expansion over recent years, propelled by state subsidies for both consumers and manufacturers as well as its comprehensive charging infrastructure that makes recharging cars convenient and centralized production of key battery materials like nickel and cobalt.

China has a rich history of industrial support, and their experience with EVs offers developing nations an opportunity to leapfrog developed ones. Yet as Matt Mazzocco argues in the MIT Technology Review, emerging economies may find it challenging to duplicate China’s success.

Shenzhen-based BYD was the pioneering company to mass produce electric vehicles on a mass market; established by Wang Chuanfu – one of China’s wealthiest people – in 1995. By 2010, this firm had already achieved great success selling gasoline-powered cars, before switching its focus exclusively toward EV production a bold gamble that has paid off tremendously; becoming today one of the world’s leading EV producers.

The End of Subsidies

Since 2005, Chinese state policy has supported electric vehicle (EV) growth by offering manufacturers billions in subsidies and procurement contracts to level the playing field with combustion vehicles. That has helped produce over 6 million EVs by 2022 – accounting for half of global sales.

But as government incentives begin to decline, including an extension of a 10% purchase tax exemption for new energy vehicles until 2025, industry must find other means of incentivizing customers such as offering reduced or waived service fees or special parking and charging facilities.

That could incentivize companies to focus more on improving technology, like increasing an EV’s driving range or cutting battery costs, writes Liu Bin. Furthermore, this could advance China’s goal of electrifying transportation at 40% by 2030 to 2025, and even allows local governments to offer purchase tax incentives.

The End of Local EV Brands

China has seen its electric vehicle (EV) market explode, thanks in no small part to government support in terms of billions being invested into branches of industry deemed strategic by Beijing, subsidies being given out directly to manufacturers, and discounts offered such as cheaper car license plates for those purchasing an EV.

China has built an expansive network of charging stations and set up facilities where drivers can swap out spent batteries for fresh ones. Electric vehicles (EVs) have seen massive sales success across its 300 local brands that range from budget offerings to premium rivals of Tesla.

Some of these firms have already expanded into European markets where customers can benefit from subsidies to purchase electric vehicles (EV). Yet the industry is now entering an unstable period where regulatory changes and global players could alter the trajectory of domestic players like Shanghai-based Nio and Wuling.

The End of Global EV Brands

China’s electric vehicle (EV) industry has experienced impressive growth, inciting envy and fear among global competitors. But much like Icarus from Greek mythology, its success may have exceeded its capabilities: China currently struggles with deflationary economic woes that limit consumer spending, prompting market forces to make themselves known and bring its fortunes down to Earth.

Since 2009, when the central government began providing electric vehicle subsidies, local manufacturers have taken full advantage of them to develop and perfect this revolutionary new technology for mass use – leapfrogging multinational automakers that had disregarded its potential up until then and becoming industry leaders that are changing global transportation infrastructure.

As China advances its EV industry, regulatory changes and international players’ entry can alter domestic brands. For example, Tesla’s Shanghai gigafactory and Geely and Volvo’s proposed joint venture to produce high-end EVs in South Carolina may challenge China’s dominance in this market and force Chinese companies to invest more heavily in European markets where an expanding middle class may purchase premium models.

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