Opinion | China’s EV industry risks becoming a victim of its own success

Nearly three years ago, I wrote a Post column detailing China’s growing electric vehicle (EV) market and telling readers to watch out for local brands.

Within these three years, Chinese auto manufacturers have become a global export juggernaut – Chinese passenger car exports have grown from just under 1 million units a year to around 5 million at the expense of US, German and Japanese manufacturers. China is now the world’s top auto exporter, driven by growing global sales of EVs but also increasing sales of traditional internal combustion engine (ICE) vehicles to large markets such as Russia.

Indeed, speaking on Tesla’s fourth quarter investor earnings call, Elon Musk noted how globally competitive Chinese carmakers had become, as Tesla itself reported earnings that came in below expectations and signalled slower growth in the year ahead.

Chinese leaders have for a while prioritised the pivot from ICE to EVs as this supports the government’s longer-term policy priority of transitioning the economy from one that has historically relied on real estate investments and lower-value manufacturing to one that’s driven by hi-tech manufacturing and consumption. EV and EV battery companies in China employ over 1.5 million workers, many of whom are highly skilled and command high salaries.

Thus, the industry continues to enjoy ample policy support in the form of consumer subsidies, tax rebates and government fleet purchases. Chinese EV companies have ready access to bank credit and cheap loans. Without a doubt, China has become the trendsetter for EVs around the world, but there is a risk that this still nascent industry may be turning into a victim of its own success.