How much did China pay to become a leader in electric vehicles? Subsidies in the spotlight

Leading role China in branch electric cars this is undeniable. Not only because more and more brands are releasing new models at very competitive prices, but also because many Western automakers depend on the Asian giant’s production lines to develop cars of this type.

However, recently the position of the United States and European countries regarding electric vehicles from China has become tougher amid accusations of unfair competition.

In May 2023, France launched its first darts with a bill banning the sale of cars manufactured outside Europe. Meanwhile, last month it became known that the White House plans to increase tariffs on Chinese electric cars from 25 to 100%. And the European Commission has not lagged behind and has already announced that it will increase the rate from the current 10% to the maximum 38.1%.

China subsidizing electric vehicle production is nothing new.. Something that is not limited to the production of the cars themselves, but also their main components (batteries, for example). And this extends to infrastructure development and deployment, tax incentives, government procurement and buyer refund policies, and a long list and so on.

But how much did China pay to become a leader in electric vehicles? Recent report from Center for Strategic and International Studies (CSIS) helps shed light on this issue. As you probably already guessed, the number is cruel. Although, most likely, this does not give a complete picture of the situation.

What China allocated to subsidize the electric vehicle industry

According to CSIS monitoring data covering the period 2009-2023, China allocated at least $230.8 billion in state aid into its electric vehicle industry. And we say “at least” because the organization itself admits that this figure will likely be higher if subsidies implemented by local or regional authorities are taken into account. Be it in the form of specific programs, access to loans at low rates, or the availability of cheap land and electricity.

An interesting example in this regard is the customer refund assistance portion. China’s central government ended such assistance in 2023, but similar programs are still being implemented locally in cities such as Shanghai or Shenzhen.

CSIS indicates that China has committed approximately $45.2 billion to subsidize its electric vehicle industry in 2023 alone. This is a slight decrease from 2022 ($45.8 billion) but a clear increase from previous years. It was $16.8 billion in 2020 and about $30.1 billion in 2021, the report said.

What does government assistance from the Asian giant affect? Historically, the most important aspect was that 10% sales tax exemption. Of the $230.8 billion CSIS estimates in industrial policy spending between 2009 and 2023, $117.6 billion corresponds to these benefits.

In second place were consumer discounts, which ceased to be part of central government policy in 2023. These were followed by support for research and development, procurement of electric vehicles for use by the Chinese government, and infrastructure subsidies for their deployment. charging stations are leading the way.

The effect of almost 15 years of assistance

Although China has allocated at least $45.2 billion to subsidize the electric vehicle industry in 2023 alone, a striking fact is observed: The amount of subsidies per car and the percentage of expenses from total sales have decreased..

Between 2009 and 2017, assistance from Chinese authorities accounted for 42.4% of total electric vehicle sales. This percentage has declined markedly in recent years, remaining at 11.4% in 2023 and 18.8% on average over the nearly 15 years covered by the study.

The subsidy for each electric vehicle made in China was the same as last year. US$4588up from $13,860 in 2018. CSIS believes it is clear that assistance provided over nearly a decade and a half has led to a dramatic change in the scenario. The Asian giant now has far more capacity to develop and produce electric vehicles and batteries than it needs to supply its domestic market, making it nearly impossible for other countries to compete head-to-head.

More than $200 billion will go to subsidize electric vehicles in China

The report indicates that China today has about 200 electric vehicle manufacturers. This led to increased vehicle inventories and a price war to gain market share. Although if we are talking exclusively about batteries, then the matter is very eloquent. In 2023, this country used less than 40% of its maximum cell production; At the same time, the installed capacity for the production of active material for cathodes and anodes was 4 and 9 times higher than the global demand for elements for electric vehicles, respectively.

But that is not all. The Center for Strategic and International Studies reports that only a few Chinese companies in the electric vehicle sector are profitable. Thus, Subsidies are a key factor for continuation of work. Interestingly, the organization does not believe that maintaining aid indefinitely is part of a plan to dominate the global market. On the contrary, they consider it a “by-product of the Asian giant’s ineffective industrial policies.” Chances are, at least in this industry, few people in the West feel the same way.