China has been a major player in the development of the electric car industry, having invested a substantial $230.8 billion over more than a decade. This investment has accounted for 18.8% of total electric car sales between 2009 and 2023. However, the scale of government support has been on the decline, dropping from more than 40% in the years prior to 2017 to just above 11% in 2023.
While China has shown strong government support for its electric car industry, the U.S. has not created conditions as attractive for the development of its own industry. Western automakers and governments have been criticized for lacking the aggressive approach that China has taken in fostering growth in the electric car sector.
Scott Kennedy, trustee chair in Chinese Business and Economics at CSIS, highlighted the lack of policy initiatives in the U.S. compared to China. Kennedy had previously laid out seven policy initiatives in a report, warning about potential trade tensions arising from Chinese electric cars.
Chinese EV companies have faced challenges despite extensive government support and market growth. The competition has been fierce, leading to a price war in the industry. Companies like BYD and Tesla have seen declines in net profit per car, indicating the struggles faced by even well-established players.
The electric car industry has experienced significant market dynamics, with the growing penetration of electric cars in China impacting foreign automakers. The intense competition has led to analysts suggesting that major U.S. automakers should consider focusing their resources elsewhere. Kennedy also emphasized the need for industry consolidation in response to the growing gap between supply and demand.
The U.S. has been making efforts to support electric cars, with the Inflation Reduction Act allocating $370 billion for promoting clean technologies. This legislation includes a $7,500 credit for qualifying electric car purchases, contrasting with the average Chinese support per electric car purchase of $4,600 in 2023.
The global electric car industry is undergoing significant changes, with China leading the way in terms of government support and industry development. However, challenges remain for Chinese EV makers, indicating the complex dynamics of the market. As countries like the U.S. ramp up efforts to support electric cars, the industry is expected to see further growth and evolution in the coming years.