China's billions fuel electric vehicle boom, sparking global competition

Noida

China's electric vehicle (EV) industry has roared ahead of the global competition, thanks in part to a staggering $230 billion in government support since 2009, according to a new study by the Centre for Strategic & International Studies (CSIS). This hefty investment has fueled China's rise as the world's dominant EV market, prompting concerns and countermeasures from rivals like Europe.

The funding has been instrumental in nurturing domestic EV manufacturers like BYD, which even surpassed Tesla as the world's top EV producer for a short period last year. China now accounts for a whopping 60% of global EV sales, dwarfing competitors like the US and Japan, according to the International Energy Agency (IEA).

This dominance hasn't gone unnoticed. Fearing a wave of cheap Chinese EVs flooding the market, the European Union imposed additional tariffs as high as 38% last week. The EU claims these tariffs are necessary to counter unfair subsidies that allow Chinese firms to undercut European rivals on price.

Subsidies have indeed been a cornerstone of China's EV strategy. CSIS data reveals that government support nearly tripled between 2017 and 2020, reaching a staggering $45 billion annually in 2022 and 2023. This support comes in various forms, including tax breaks, infrastructure subsidies, and buyer rebates for EVs.

The true figure is likely even higher, with CSIS acknowledging that their estimate excludes regional government support for local EV companies and subsidies for other parts of the EV supply chain, such as battery manufacturing. Battery giant CATL, for example, is estimated to have received $809 million in government aid last year, double the amount received in 2022.

This massive support has fostered fierce competition amongst Chinese EV companies, leading to a significant advantage: low prices. BYD's Seagull hatchback, a top seller in China, starts at under $10,000 – a price point unmatched by most EVs currently in the US market. This affordability gap is a key factor in why China is outpacing the US in the transition to electric vehicles.

The US government is taking steps to catch up. The 2022 Inflation Reduction Act (IRA) offers tax credits for US-made EVs, effectively providing subsidies of up to $7,500 per vehicle. A Penn Wharton University study estimates that all clean vehicle provisions within the IRA will cost roughly $393 billion between 2023 and 2032.

China's EV dominance, fueled by billions in government support, has ignited global competition. While the US is making efforts to close the gap, the question remains: can other countries overcome China's head start in this crucial green technology race?