When it comes to China’s electric vehicles (EV) industry, its market has expanded exponentially compared to other markets. Now, a new study by the Center for Strategic and International Studies (CSIS) has revealed that China’s EV industry received at least $230.8 billion in government support between 2009 and 2023.

As a result, this major investment has played a pivotal role in China’s rapid progress to become the world’s largest EV market, with sales anticipated to reach 10 million units in 2024.

Notably, the research was conducted by CSIS trustee chair Scott Kennedy. He analyzed five main areas of support for this research: national rebate programs, infrastructure funding, research and development programs, government EV purchases, and exemption from China’s 10% sales tax. Interestingly, the bulk of the support came from buyer rebates and sales tax exemptions.

In detail, Kennedy describes the $230.8 billion figure as a “highly conservative estimate,” stating that it excludes local government rebates, low-cost land and utilities for EV companies, and subsidies for the broader supply chain, including battery producers.

Moreover, the scale of government support represents 18.8% of total EV sales in China during the period researched. However, the ratio of support to sales has declined over time, dropping from over 40% before 2017 to just above 11% in 2023. On a per-vehicle basis, subsidies have fallen from $13,860 in 2018 to under $4,600 in 2023.

Through this support, it has led to a highly competitive Chinese EV market with about 200 EV producers contending for market share. However, the resulting price wars and increased EV exports have stirred concerns in Western markets. As such, the European Union (EU) and the United States (U.S.) have set to impose higher tariffs on Chinese EV imports to protect their domestic automotive market.

Particularly, the EU made plans to raise tariffs to as high as 38.1% on Chinese EVs due to citing unfair subsidization. Meanwhile, the U.S. has quadrupled its tariffs on Chinese EVs from 25% to 100%.

Furthermore, Kennedy argues that Western automakers and governments have been slow to respond to the Chinese EV challenge, stating that the $7,500 credit available to U.S. buyers under the Inflation Reduction Act now exceeds the average per-vehicle subsidy in China.

Despite the massive investment, profitability remains a challenge for many Chinese EV automakers. According to CLSA analysis, BYD has seen its net profit per car decline to $739 over the last 12 months and Tesla’s profit per EV has dropped to $2,919.

As the global EV market continues to see growth, the impact of China’s substantial investment in its EV industry is likely to be felt for years to come. In the coming years will be paramount to see the response from other markets to address the challenge to develop effective strategies to compete in this rapidly changing automotive landscape with EVs. Nevertheless, the growth of the global EV market is overall a win for the acceleration of electric mobility.

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