China raises its electric car game

China began the millennium with a reputation as the land of the bicycle. Twenty-four years later, the country has not only established itself as the world’s largest car producer, but it is also entering the next calendar year as the new global export leader, having surpassed neighboring Japan. For the first time in its history, the Asian giant is setting standards in the automotive sector, and it is doing so thanks to the unstoppable rise of its electric vehicles (EVs), which have opened up a range of opportunities and challenges that will shape the international scene in the coming decades. While the need to promote the environmental energy transition is discussed at every summit in Asia (although commitments do not always translate into action), new energy cars are no longer just a mere promise for the future.

The figures speak for themselves: in Europe, one in eight vehicles purchased in 2022 was electric (in the U.S., one in seven), while in China, EVs accounted for 25% of total car sales during the same period. According to data from the China Association of Automobile Manufacturers, in just two years, the EV penetration rate in the world’s second-largest economy has soared from 10% to 35%, and the Hong Kong bank HSBC estimates that the figure will reach 90% by 2030.

This change in Chinese society would not have happened without the government’s support for the EV sector. In 2014, Beijing introduced tax exemptions for the purchase of green cars, and by 2022, it had invested almost €30 billion ($32.74 billion) to encourage their consumption. This year, the Ministry of Finance announced its largest concession to the industry, a €66.3 billion ($72.35 billion) package of tax breaks over four years for battery, plug-in hybrid and hydrogen fuel cell EVs.

“It’s much cheaper than a gasoline car,” a 35-year-old Wuhan businessman, who identifies himself as Walden, explains by phone. Three years ago, he bought an XPeng P7 for about $41,475. Like many of his compatriots, Walden prefers a Chinese model to a foreign one because it has more accessories — many compare it to a smartphone on wheels — and because there’s much more user interaction: “I can give 90% of the instructions with my voice,” Walden enthuses.

Since 2020, fierce competition among the estimated 300 Chinese manufacturers has encouraged local firms to innovate and adapt to consumer tastes at a faster rate than foreign ones do. In fact, approximately 80% of new electric cars registered in China in 2023 are domestic brands. “The speed with which China has embraced new technologies in the automotive industry is unparalleled,” Moody’s ratings agency notes.

Having the right infrastructure in place has also facilitated the transition. China boasts the world’s largest charging network, with over four million points across the nation. In 2022 alone, China accounted for over 70% of the units installed around the globe, and, according to the China Freight Alliance, 442,000 more were added between January and June of this year.

The country’s love affair with the electric car did not happen by chance. China was lagging behind in the production of combustion engine vehicles, and with EVs, it found a gateway to markets that had previously resisted it. At the end of the first decade of the 2000s, Chinese authorities envisioned a strategic investment plan: if China developed this technology early enough, it could gain a major competitive advantage. And so it has.