China’s electric vehicle industry has accelerated dramatically, quickly capturing a large share of the global market and raising concerns among foreign governments.
Bloomberg said that with Chinese electric cars flooding international markets, countries such as Canada, the United States, and the European Union imposed tariffs to protect their auto industries.
The agency’s report highlights the key factors behind the success of electric vehicles in China, including large government subsidies, wise leadership, and strategic moves by the industry.
Strategic vision and government support
Bloomberg says one of the most critical elements in the success of China’s electric vehicle industry is the strategic vision of leaders like Wan Gang, Minister of Science and Technology from 2007 to 2018.
Wan identified early on that Chinese automakers would struggle to compete with foreign brands in internal combustion engines, but saw a unique opportunity in new energy technology, according to Bloomberg.
“Wan’s vision and early actions were essential to making China a world leader in electric vehicles,” Jörg Wuttke, former president of the European Union Chamber of Commerce in China, told the agency.
The Chinese government provided at least $231 billion in subsidies to the electric vehicle sector from 2009 to the end of last year.
This financial support, along with other strategic decisions, such as inviting Elon Musk’s Tesla to manufacture in China, has spurred the development of a robust electric vehicle supply chain.
The efficiency of this supply chain is evident in the Yangtze River Delta, where electric vehicle manufacturers can get all the necessary parts within 4 hours.
Challenges facing global competitors
As Chinese electric car models, known for their affordability, enter global markets, foreign governments are increasingly concerned about the impact on their auto industries, according to Bloomberg.
Canada recently joined the United States and the European Union in imposing tariffs on Chinese electric vehicles. The tariffs are intended to protect domestic industries, giving them time to become competitive with Chinese electric vehicle prices.
However, definitions alone may not be enough. “The US, EU and Canada will need vision, entrepreneurship and innovation to match China’s pace in the electric vehicle market,” analysts at Bloomberg Economics point out.
While tariffs may provide temporary relief, building a competitive advantage will require significant effort and investment over the long term.
Future trends
Bloomberg notes that China’s rapid progress in the electric car industry comes amid broader economic challenges, including a slumping property market, deflationary pressures, and high youth unemployment.
These issues are likely to be addressed at the upcoming third plenary session of China’s ruling Communist Party, scheduled for July 15-18, according to Bloomberg. The gathering is expected to chart the long-term economic policy path for the world’s second-largest economy.
Bloomberg Intelligence expects that the plenary session will focus on achieving self-sufficiency in technology, which is a priority for Chinese President Xi Jinping.
Xi warned that “core technologies are being controlled by others,” emphasizing the need for China to close the gap. The focus is in line with reports that the Biden administration is considering further restrictions on China’s access to AI-related chip technology.
Although the outcome of the plenary session remains uncertain, expectations are for measures to boost consumption and revive the sluggish stock market. However, there may not be a major economic stimulus in the near future, as China has so far adopted a cautious approach.
