China Electric Car Sales Rise, But Will They Last?

China Electric Car Sales Rise, But Will They Last?

China has seized control of the electric vehicle market, and its dominance is likely to continue.china electric car sales This is due to a combination of government policies that fostered the industry, industrial self-reliance and consumer demand. From 2009 to 2022, the country poured over 200 billion yuan ($29 billion) into relevant subsidies and tax breaks. It also helped domestic EV brands stay afloat in their early years by handing out procurement contracts. And it subsidized electricity prices for EV drivers and exempted them from 10% of the vehicle purchase taxes, putting their price-weighted averages on par with gas-powered vehicles.

This helped propel China's EV sales to record levels.china electric car sales In 2023, the nation sold over 6 million EVs—and it accounts for about half of global EV sales. China's EV makers—including BYD, SAIC-GM-Wuling, Geely, Nio, Xpeng and Li Auto—have made a name for themselves abroad, too. But they're still a fraction of the world's biggest manufacturers, and they face stiff competition from Western rivals and the challenge of entering new markets.

To fend off cheaper competitors, these Chinese companies are slashing their prices. But they may not be able to maintain such discounts forever. Amid this ruthless price war, their profit margins have plunged to the lowest level in a decade.

The low prices have fueled the growth of these firms, but they have also raised concerns about their future profitability and sustainability. Some experts believe their prices will need to fall even further to attract buyers in developed markets, where personal cars remain a minority mode of transportation, and where switching to EVs will have less impact on emissions.

In Europe, Chinese carmakers are trying to break into a market where many consumers are wary of foreign models. They're making their case with discounts and other incentives, but they're also trying to build up a loyal customer base. This will be critical if they're going to expand into more mature markets, like the United States.

But as the era of cheap Chinese EVs draws to a close, lawmakers in both parties are urging the administration to do more to prevent them from entering the market. A bipartisan group of congressional members called on President Biden in November to "impose additional tariffs and examine ways to further restrict exports from the People's Republic of China to America."

For now, it's unclear whether Beijing will heed such calls. But if it doesn't, lawmakers from Detroit to Green Bay could face political pressure to further target China, or even impose tariffs on Chinese carmakers that make their way to the U.S.—an outcome that would have a profound effect on the global automotive industry. It's a story that's well worth telling.