For China, electric vehicles are not only a source of profit or an indicator of technological progress but also a manifestation of its “soft power.” For example, the PRC donates electric vehicles to African countries in exchange for the right to extract rare earth metals, or installs charging stations free of charge in Southeast Asia with the aim of securing lithium extraction rights.
At present, China controls 60% of global electric vehicle production. The flagships of this industry are BYD, CATL, and NIO, which are actively expanding into foreign markets worldwide. China has managed to combine two powerful success factors: technological dominance and effective government policies to stimulate production and development. From a geopolitical perspective, China’s interest in electric vehicles is driven by the desire to strengthen technological sovereignty, energy independence, and even “soft power” through technology.
It is worth mentioning the “Made in China 2025” policy, under which the Chinese government played a positive role by providing subsidies, municipal quotas, and controlling critical supply chains. The European Union is already actively countering China’s expansion into its market. The shift to electric vehicles is also causing structural changes within China — the workforce is gradually moving from industries focused on internal combustion engine production to electric motor manufacturing. Another factor is China’s global monopoly on extracting key metals such as lithium and rare earth elements. The Chinese leadership views technological sovereignty as the foundation of its power in the modern era.
An important term in this context is “Dual Circulation” (双循环), adopted in 2020. China uses its vast population as a factor of economic power, building a self-sufficient domestic market. In theory, this could turn China into a modern autarky — something that was historically unattainable for other countries, including the USSR. Such an aspiration for autarky reflects deep archetypes of the Chinese collective unconscious, which historically sought to isolate themselves from “barbarians” through “Great Walls.”
On the other hand, China is building electric vehicle factories in Hungary, Thailand, and Brazil, and is betting on electric vehicles as a way to reduce oil imports. China supplies batteries to German auto giants and is testing battery swap stations as a way to enter the German market.
The PRC also uses electric vehicles to improve its image, which has been partly tarnished by U.S. media accusing China of neglecting environmental issues. Electric vehicles produce no CO₂ emissions, allowing Beijing to promote a “green” image. Chinese marketing actively promotes the concept of battery-as-a-service, turning the battery into a service rather than a product: at battery swap stations, the battery is constantly renewed.
The first systemic strategy to support automakers was outlined in the Energy-Saving and NEV Industry Development Plan 2012–2020 (《节能与新能源汽车产业发展规划》). The government provided direct subsidies — for example, up to USD 15,000 per vehicle in 2015. A “quota” was set, which was gradually increased:
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2018 — 8% of all vehicles sold had to be NEVs (battery electric vehicles — BEVs, plug-in hybrid electric vehicles — PHEVs, and fuel cell electric vehicles — FCEVs);
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2019 — 10%;
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2020 — 12%.
For failing to meet quotas, fines of USD 3,400 per each missing NEV credit were imposed, but “lagging” companies could purchase credits from those who exceeded the plan.
China forced Western manufacturers to localize production (VW, GM, Toyota). Some small domestic companies could not withstand the competition. For example, VW initially had only 0.6% of its sales in the NEV category and was forced to buy credits from BYD to avoid a USD 400 million fine. As a result, by 2023, 30% of VW’s sales in China were electric vehicles.
21st-century China demonstrates that a planned economy can exist at least in the form of large-scale government intervention — through subsidies, quotas, and tax incentives:
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2021 — the NEV quota was raised to 18%;
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minimum range requirements were set at no less than 200 km;
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starting in 2024, the PRC encourages the production of hydrogen vehicles, counting one FCEV as five NEVs.
For manufacturers, the following incentives were introduced:
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From 2024, VAT for battery producers was reduced to 9%, and BYD and CATL pay only 10% instead of 25% corporate income tax.
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Startups Xpeng and NIO are exempt from corporate income tax for the first three years;
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imports of manufacturing equipment, including factory robots, are exempt from customs duties;
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factory land rent has been reduced by up to 100 times (example — NIO in Anhui: USD 1 instead of USD 50 per m²);
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electric vehicle owners are exempt from the annual vehicle tax (USD 100–500);
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key specialists are provided with free housing.
Chinese officials also compete with each other, as the higher the GDP growth in their administrative unit, the faster they advance in their careers.
In 2024, China ranked first in the world in production, sales, and exports of New Energy Vehicles (NEVs), according to a People’s Daily article dated May 1, 2024. The article explicitly states that “some developed countries” have already begun protecting themselves from the influx of Chinese NEVs through “trade regulation.” China is also currently working to strengthen its “resource security” in this regard, exploring promising cooperation opportunities with Africa and Southeast Asia. The People’s Daily piece places strong emphasis on China’s efforts to reduce carbon dioxide emissions into the atmosphere — a smart PR move against the backdrop of “negative PR” from Western media, which claim that China is not concerned about environmental issues.
In 2023, production in the PRC of NEVs, solar panels, automotive lithium-ion batteries, and other related “new trio” products grew by 30.3%, 54.0%, and 22.8% respectively compared with 2022, while the export growth rate of the “new trio” reached 29.9%, and export value exceeded 1 trillion yuan for the first time.
Since 2015, China’s NEV production and sales have ranked first in the world for nine consecutive years, and in 2023, exports of such vehicles surpassed Japan’s, making China the world leader.
In 2011, China’s production of new energy vehicles (NEVs) was less than 10,000 units, and in 2012 — 12,500 units, but by 2017 NEV production and sales in the PRC had reached about 800,000 units. In 2023, production and sales surged to 9.6 million and 9.5 million units respectively. In 2022, China’s NEV production totaled 6.7 million units, accounting for 64% of global output. In 2023, total vehicle production and sales in the PRC reached 30.161 million and 30.094 million units respectively, with China remaining the world leader in vehicle production and sales for 15 consecutive years, and the NEV penetration rate reaching 31.6%.
In 2022, China’s electric vehicle exports amounted to USD 20.09 billion, representing 25.2% of total global EV exports, ranking second in the world after Germany (USD 26.46 billion). However, in terms of export volume, China shipped 579,000 passenger EVs abroad in 2022, making it the largest exporter of passenger electric vehicles in the world.
China has managed to establish a closed-loop NEV production cycle — from raw material extraction to final assembly. According to the International Energy Agency, more than half of the world’s lithium, cobalt, and graphite is processed in China, with the country’s production capacity for cathode materials for power batteries accounting for 70% of the global total, anode materials — 85%, and battery manufacturing — three-quarters of the world’s total capacity.
The New York Times report from May 2023 states that China’s share in the global supply chain for batteries and new energy vehicles is as follows: cobalt ore — 41%, cobalt refining — 73%, cathode materials — 77%, anode materials — 92%, batteries — 66%, and electric vehicles — 54%. The technical level of lithium-ion batteries in China is among the most advanced in the world, and a search in the global patent database incoPat shows that between 2000 and 2021, mainland China filed 15,501 patent applications for lithium-ion batteries, while the rest of the world filed a total of 4,300.
In 2022, global electric vehicle sales exceeded 10 million units, and among the world’s top 15 automakers, China is home to six companies, with BYD ranking first globally at 1.858 million units. In Q4 2023, sales of purely electric passenger cars by BYD surpassed Tesla for the first time, making it the world’s largest manufacturer of purely electric vehicles. Chinese companies held six of the top ten positions in the global ranking of traction battery manufacturers by installed capacity in 2022. The average price of domestic Chinese brand vehicles rose from 100,000 yuan in 2015 to 180,000 yuan in 2023, increasing product added value and strengthening market positions.
The following reasons are cited for the rapid development of China’s electric vehicle industry:
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breakthrough innovations;
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government industrial development policy;
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a well-developed industrial system;
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a “super-scale” market;
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a strong digital industry;
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“sufficient” market competition.
As noted earlier, the article expresses concern for environmental issues, contrary to Western media publications suggesting the opposite about China. The author boasts that the PRC is quickly making up for lost time compared to Western economies, and that the electric vehicle industry is following its own trajectory, different from that of internal combustion engine (ICE) vehicles, where gearboxes and fuel engines are key, whereas for electric vehicles, the critical components are batteries, electronic control systems, and drive motors. In other words, part of Western technological achievements has been devalued almost overnight, and China aims to “overtake the West on the curve.”
The second factor is the role of the state, which in China is strong and directive, unlike in many Western countries. Due to the limited driving range, the industry requires government support in its early stages. Once again, China relies on its vast domestic market. A car consists of about 10,000 parts, the production of which requires a coordinated infrastructure. The positive role of the market economy is also mentioned, as it fosters competition, which in turn ultimately leads to increased efficiency and the gradual disappearance of the need for state support.
The Xinhua article reports that driverless taxis are already operating in China. According to the China Association of Automobile Manufacturers (hereinafter — “China Association of Automobile Manufacturers”), sales of new energy vehicles (NEVs) will grow from 3.521 million units in 2021 to 12.866 million units in 2024, with a compound annual growth rate of 38.2%, significantly exceeding the international level. In the first half of 2025, production and sales continued to grow steadily — 6.968 million and 6.937 million units respectively — up 41.4% and 40.3% year-on-year; NEVs accounted for 44.3% of total vehicle sales.
According to the China Association of Automobile Manufacturers, in the first half of the current year, 1.06 million NEVs were exported, a 75.2% increase compared to last year.
Last year, the average range of Chinese electric vehicles was nearly 500 kilometers, and fast-charging technology — capable of charging 80% in 15 minutes — has already reached mass production and application.
China encourages municipal vehicle fleets to purchase exclusively domestic electric vehicles and offers preferential loans (0.5–2% compared to the market rate of 4.5%). Land for charging stations is provided free of charge. One example of regional government intervention is the bailout of NIO by the local government of Hefei: USD 1 billion in investment, free land, and a state order for 5,000 vehicles, which boosted the company’s share price from USD 2 to USD 30. The government of Henan Province banned internal combustion engine buses in 20 cities in the region, lobbying for the interests of electric bus manufacturer Yutong, which has dominated the European e-bus market since 2022. However, there are also cases of failure: the Tianjin government went bankrupt after investing in Byton.
China’s central government is also seeking to reduce regional inequality between wealthy coastal provinces and poorer inland regions. At the same time, the wealthier provinces are looking for cheaper labor within the country — in less developed areas.
China ranks third in the world in lithium production, after Australia and Chile. Moreover, since October 2023, the PRC has restricted graphite exports in response to U.S. sanctions. CATL controls 37% of the electric vehicle battery market thanks to its LFP batteries, which are inexpensive to produce and contain no cobalt. BYD holds 16% of the market, with batteries noted for their enhanced fire resistance. In 2023, China allocated USD 5 billion from the state budget for research into solid-state batteries, aiming to increase EV driving range to 800 km by 2026. If a manufacturer uses more than 90% Chinese-made components, it receives a tax holiday.
The Achilles’ heel of China’s sovereignty in electric vehicle production remains its dependence on imports of semiconductors, chips, AI processors, and IGBT transistors. China is pressuring its manufacturers to abandon chips from Taiwan’s TSMC and South Korea’s Samsung, stripping violators of subsidies. Preference is given to domestic producers such as SMIC (Shanghai). The goal is to completely end chip imports by 2027.
China controls over 50% of the U.S. drone market (DJI). The PRC is promoting its own V2X (Vehicle-to-Everything) protocols through the Belt and Road Initiative. The European Union has banned the use of vehicles equipped with Hikvision cameras as a protest against the repression of Uyghurs. In response, China has restricted the export of geolocation-related technologies.
Conclusion: China’s success in electric vehicle production can be measured by the aggressive response of the U.S. and the EU. Washington has already banned the procurement of Chinese electric vehicles for the public sector, while the EU is using other protectionist measures — for example, conducting investigations into whether Chinese brands receive state support in violation of WTO rules; restricting the import of key metals from China; encouraging the localization of battery production in Europe; and providing its own subsidies for local manufacturers.
Andrii Timchenko for UIP
