A new study highlights the long-term planning behind China’s global dominance of the electric vehicle market
The strategic determination of the Chinese Government to develop a world-leading automotive industry has come to dramatic fruition in the last three years. After more than 60 years in the planning, China has achieved a formidable lead in every link of the EV supply chain, from control of raw materials to battery manufacture, vehicle production and sales, and public charging infrastructure.
From the development of a rare earths value chain in the 1960s to the creation of the New Energy Vehicle industry in the 1990s, and a tight focus on battery electric vehicles since 2012, China has been several steps ahead of European and US competitors, according to new research.
The study by Marc Alochet, research associate at the Management Research Center (CRG) of the École Polytechnique, highlights both the forward thinking policies of the Chinese state as well as its ‘whatever it takes’ strategy in terms of massive investment in the EV industry. The report estimates that by 2022 China had invested at least €110-160 billion in every step of the EV lifecycle.
Chinese dominance
And the results are clear. At the end of 2022, China accounted for 57% of the global share of sales, 60% of the global electric vehicle fleet, and 75% of global battery production capacity.
In stark contrast, Europe has set ever tighter regulations for vehicle emissions, but without establishing a path to achieve them. Only in 2023 did the European Commission introduce the notion of strategic raw materials, adding copper, nickel and manganese to its list, yet in March 2023 its communication on the Critical Raw Materials Act conceded that: "At present, there is no regulatory framework aimed at structurally reducing supply risks across the range of critical raw materials." As a result, Europe is forced to rely on establishing free trade agreements with third countries for the supply of raw materials.
The EU has set a target to ban the sale of ICE vehicles from 2035, but national governments have introduced and already removed EV purchase incentives, while a ‘level playing field’ approach to state aid for vehicle manufacturers has led to significantly lower subsidies than in China.
State investment
The level of US public investment has been even lower – barely $8 billion in the entire EV value chain up to 2021. But the Infrastructure Investment and Jobs Act of 2021, followed by the Inflation Reduction Act (IRS) of 2022 have both brought enormous investment, although it’s very much a case of playing catch-up with China, says the study. On the plus side, American OEMs should benefit from the protectionism in the IRA, which includes a $7,500 tax credit for electric cars whose battery components exceed a certain percentage of manufacture in the US, Canada or Mexico.
EV charging
The US and Europe are also both playing catch up with China in the public charging infrastructure required to support EVs. The US has made $5 billion (€4,5 billion) available between 2022 and 2026 to develop a national public electric vehicle charging network, with 80% funded by the federal government. At the end of 2022, there were 114,000 public charging points in the US, although the study forecasts that this will increase to 1,200,000 by 2030. Meanwhile, by the end of 2022 Europe had 530,000 public chargers.
To put these figures into context, a year earlier China already had about 1,140,000 charge points, rising to 5.84 million in March 2023, and a forecast of 8,600,000 by the end of the decade.
Engineering development
China has the lead, too, in EV development, setting new regulations to drive efficiency improvements. Whereas European and US tastes favour large SUVs with heavy battery packs for long range driving, China is pioneering lower energy consumption cars, which will have a smaller carbon footprint in manufacture and a cheaper retail price.
China wins?
In Tesla’s 2023 Q4 earnings call with analysts, CEO Elon Musk said: "If there are no trade barriers established, they [the Chinese] will pretty much demolish most other car companies in the world. They're extremely good."
Report author Alochet agrees that the wind is in China’s sails. “If we were to stop the clock now, we would probably conclude that China has definitely shaped the future of the global electric automotive industry,” he said.
But, he adds, the low emission momentum of states like California and the US’s ambitious EV sales targets, allied to low energy prices, could make the US a strong automotive manufacturing hub, so long as the next administration continues to support President Biden’s goals.
In Europe, however, maintaining fair competition in the face of US and China protectionism “is a handicap for the industry,” especially with China also being the primary source of batteries in European EVs.
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