Beijing, China

China has invested USD 230.8 billion over more than a decade to bolster its electric vehicle (EV) industry, according to analysis published by the US-based Center for Strategic and International Studies (CSIS) on Thursday. This substantial government support equates to 18.8% of total electric car sales between 2009 and 2023, noted Scott Kennedy, trustee chair in Chinese Business and Economics at CSIS. He highlighted that the ratio of such spending to EV sales has decreased significantly, from over 40% before 2017 to just above 11% in 2023.

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Such findings come at a time when the European Union is set to impose tariffs on the Chinese electric cars imported due to the subsidies that are applied in their production. However, last month, the US also stated that it plans to increase tariffs on Chinese electric vehicles to 100%.

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Kennedy also highlighted that stated policies to support electric cars have also employed other policies that negatively affect foreign auto manufacturers but benefit China’s auto industry. However, he noted that the US has not well prepared the environment for the native electric car industry development. “Still, there are instances where the Western automakers and governments have prevaricated and have not been all that assertive,” Kennedy said. He previously claimed in a report four years ago that there were seven policy initiatives that could foreshadow trade tensions originating from Chinese electric cars.

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Not all of these government subsidies and incentives can be said to have directly supported the growth of cars. Even in the early stage of China’s EV construction, the Ministry of Finance found that at least five firms cheated for over one billion yuan (USD 140 million) from the government.

Made-in-China vehicles have also experienced improved market positioning, as more customers are turning to electric cars over fuel-powered vehicles for imported automobiles. Competition is stiff with corporate analysts from the Bank of America stating that major automakers in the United States should pull out their operations in the country.

"Independent auto analysts and Western automakers with whom I've spoken all agree that Chinese EV makers and battery producers have made tremendous progress and must be taken seriously," Kennedy stated. Nonetheless, he noted that despite extensive government support and market growth, Chinese EV companies have yet to see significant profit increases. "In a well-functioning market economy, firms would more carefully gauge their investment in new capacity, and the emergence of such a sharp gap between supply and demand would likely result in industry consolidation," he added.

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BYD's net profit per car has declined over the last 12 months to USD 739, according to CLSA's first-quarter analysis, while Tesla's has dropped to USD 2,919. The EV industry has faced an intense price war over the past year, with companies either reducing prices or launching lower-priced product lines.

Chinese EV startup Nio, which is still operating at a loss, projected last month that about 10 automakers will exit the Chinese market, leaving 20 to 30 players. In contrast, the US has been ramping up efforts to support electric vehicles. The Inflation Reduction Act, signed into law in August 2022, allocated USD 370 billion to promote clean technologies. Kennedy noted that this legislation includes a USD 7,500 credit for qualifying electric car purchases, compared to the average Chinese support per electric car purchase of USD 4,600 in 2023, down from USD 13,860 in 2018.