J Yamini Â

On 27 May, shares of Bǐyàdí QìchÄ“ (BYD), a major electric vehicle (EV) company in China, fell following the discounts. Despite this decline, BYD continued to maintain its growth while competing with the global rival Tesla. China emerged as a leading automobile market with an expanding electric vehicle (EV) sector. Developing AI technology is increasingly integrated into manufacturing within these industries. Major EV companies are targeting Southeast Asia, Latin America, and Europe amid America’s tariffs. The sustainable development plans of Western countries also contribute to the expansion of EVs.

What is the state of China’s EV industry?
First, China is the world’s largest electric car manufacturing hub. EV exports have increased from five lakh units in 2021 to 1.5 million units in 2023. EVs dominate China's automobile market, accounting for 95 per cent of sales. The battery-producing sector largely contributes to EVs. China produces 70 per cent of Lithium-ion batteries globally.  Second, the infrastructure capacity of China. There are six lakh new energy-related companies, they have a strong supply chain. The upstream industry consists of raw materials like lithium, cobalt, and the manufacturing of core parts such as power batteries and electronic control. The other two segments, midstream and downstream, provide services like charging equipment and recycling services. Government policies support these supply chains. China had 8,74,000 private charging piles out of 17 lakhs, which indicated an increase in the collaboration between government and private actors. Original Equipment Manufacturers (OEMs) have integrated supply chains competing with Western OEMs.

What gives China's EV industry a competitive edge?
First, China has a larger EV market in Europe. The tariffs imposed by the EU affected the EV industry. To tackle this, Chinese manufacturers diversified their markets and focused on regions unaffected by EU tariffs and strengthened their hold in the domestic market. Second, China has opened EV benefits to foreign investors. The Gigafactory in China is Tesla’s most productive manufacturing unit, with half of Tesla’s cars delivered from there in 2022. This encourages foreign producers to invest heavily in the Chinese market and makes the domestic market more competitive. Third, various companies have cut prices across several models by up to 30 per cent as part of the price war. Additionally, BYD holds 32 per cent of China’s electric vehicles while Tesla holds just 6.1 per cent in the domestic market, mainly due to its hybrid technology and services. BYD is providing an ultra-charging system and an advanced assistance system called “God’s Eye” for free, whereas Tesla’s self-driving system requires a subscription. All these features contribute to the expansion of the EV industry in China. 

What has shaped their rise?
First, as early as the 2000’s China began investing in the EV industry when other automotive giants like the US, Germany, and Japan were hubs for conventional internal combustion, China hence invested in cars powered completely by EV. In 2001, EV was the priority in science and research projects in the five-year plan. From 2009-2022, the government provided financial subsidies to EV companies to manufacture buses, taxis, and cars. It poured over USD 29 billion into subsidies and tax breaks. Though the benefits ended in 2022, the ‘dual credits’ policy continued to elevate the industry. Second, 40 per cent of the vehicle cost is of the battery, which is the forerunner of lithium iron phosphate batteries (LFP), an alternative to West NMC. China’s strong chemical industry and refineries gave it large access to raw materials in Chile and Australia. A highly localized supply chain cuts off transportation and logistics, which helped to maintain cheaper overall production and provided a 20 per cent cost advantage. Third, reducing oil imports, improving the manufacturing workforce, and reducing air pollution were priorities. Clean energy contributed 10 per cent to China’s GDP in 2024, and 39 per cent of the clean-energy economy is from electric vehicles and batteries.

References:

•    “400 Chinese EV companies ceased operations between 2018-2025, only a few will dominate by 2030”, EV Boosters,29 April 2025
•    Ilkhan Ozsevim,  “China's EV boom forces shifts in global manufacturing”, AMS, 9 May 2025
•    “Trends in electric cars”, IEA, 2024
•    Zeyi Yang, “How did China come to dominate the world of electric cars?”, MIT Technology Review, 21 February 2023
•    Dong-xiao Yang, Juan Meng , Lei Yang , Pu-yan Nie , Qian-ge Wu “Dual-Credit Policy of new energy automobile in China: Inhibiting scale or intermediary of innovation?”, ScienceDirect, September 2022
•    “China's BYD overtakes Tesla as the world's top EV seller; this is the end of Tesla's reign, or can their refreshed Model Y fight back? What's behind the electric shift and what does it mean for the future of electric cars?”, Economic Times, 26 March 2025
•    Mokter Hossain, “How Chinese Companies are dominating the electric vehicle market worldwide”, California Management Review, 25 March 2024 

About the Author
J Yamini was a research intern at NIAS.

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