How did Beijing become a world leader in electric vehicle production and export? A brief analysis

• A mix of factors has generated this result: state support, strong domestic supply chains, product innovation, intellectual property (IP) theft and forced technology transfers.

• But it may not all be gold that glitters. Huge state subsidies, especially those bestowed by China's local governments, have ended up generating huge problems for domestic auto industries, triggering a downward price war, mainly due to overproduction (dumping).

• It should be noted, however, that many countries willingly accept cheap Chinese EVs, indicating that China's market share is likely to increase and ultimately displace existing suppliers in those markets. A development, therefore, that could reduce the revenues of foreign automakers derived mainly from overseas sales.

Index

Effects of Chinese overcapacity in the EV sector

State support

Strong domestic supply chains

Product innovation

The most innovative technical solutions

The other side of the coin: the war on price reductions

The growing global ambitions of Chinese automotive brands were the focus of the 21st Shanghai International Automobile Industry Exhibition where major Chinese manufacturers unveiled targeted strategies to spur growth abroad. 

The show, also known as Auto Shanghai 2025, attracted nearly 10,000 international visitors in the first two days alone, with Chinese cars standing out for innovation, adaptability and consumer-focused design.

Supported by increased exports of electric vehicles (EVs), in growth by 43.9% year-on-year to 441,000 units in the first quarter of 2025, China's automotive sector is shifting gears from domestic dominance to global resonance. 

The global EV market, which went from $384.65 billion in 2022 to $500.48 in 2023, according to projections by Fortune Business Insights, is expected to more than triple by 2030, with significant growth in Asia-Pacific. And as global auto companies increasingly focus on EV production, Chinese manufacturers are now poised to dominate global sales.

According to one esteem, Chinese EVs will account for a third of global market share by the end of this decade, “increasing market share outside China from 3% in 2024 to 13% in 2030.”

BYD has become one of the major players in the global market of such vehicles, dominating domestic and foreign companies in the Chinese market and surpassing Tesla in global EV sales in the last quarter of 2023.

Other Chinese companies - which already operate at home in what is considered the largest automotive market in the world (second a relationship of the International Energy Agency, in fact, more than half of the electric cars in circulation throughout the world are located in China) - they have established beachheads abroad and are increasing their presence in international EV markets. 

Hangzhou-based Geely Auto in 2023 has recorded an increase by 48% compared to the previous year in EV sales, with over 270,000 vehicles sold abroad.

The state company SAIC, in 2023 has registered an 18.8% increase in overseas sales compared to the previous year and announced plans to begin promoting 14 new EV models for overseas markets by 2025.

A mix of factors has allowed Beijing to become a world leader in the production and export of electric vehicles, such as state support, strong national supply chains, product innovation, the intellectual property (IP) theft and forced technology transfers.

But all that glitters couldn't be gold. The enormous public subsidies, especially those given by local Chinese administrations, have also ended up generating enormous problems for the national automotive industries, triggering a war on prices, mainly due to excess production (dumping).

However, it should be underlined that mMany countries are willingly accepting low-cost Chinese EVs, indicating that China's market share is set to increase and ultimately crowd out existing suppliers in those markets. A development, therefore, which could reduce the revenues of foreign car manufacturers deriving mainly from sales abroad.

Effects of Chinese overcapacity in the EV sector

Exploiting the regulatory void existing in WTO rules, China often distorts world markets flooding them with low-priced goods. For example, Beijing's overcapacity significantly depressed global fiber optic cable prices in 2019. The strategy consists of eliminating all competitors and obtaining absolute control of the critical 5G infrastructure asset. Beijing has already implemented the same strategy in various sectors, such as steel and aluminum, where today it is the leader with over half of world production. Although the Covid-19 pandemic has drastically reduced demand for steel and aluminum products, China has also accelerated their production in 2020, increasing inventories and contributing to the drastic global depression of their prices.

Overcapacity, therefore, can also be spoken of with reference to the Chinese EV automotive sector. 

Chinese car manufacturers produce 21% of the world's passenger vehicles (a figure that analysts estimate will reach 33% by 2030) and, as of 2022, produced 62% of the world's EVs and 77% of EV batteries.

From 2020 to 2023, China's global EV exports are increase by 851%, with the largest share of these exports (almost 40%) going to Europe.

The global patent share of Chinese entities in the field of electric propulsion has also increased, passing from 2.4% in 2010 to 26.9% in 2020.

Overall, Chinese EV and EV battery companies have at least matched, and in some cases surpassed, their Western counterparts in terms of innovation capacity and product quality.

The global dominance of this sector is one of the plans wanted by China in recent years and among the most subsidized with public capital. In fact, the devastating effects on Western and Eastern markets are there for all to see. First, this is leading to an ousting of the foreign auto industry from China.

State support and growing competition from local companies, in fact, have led to a decline in the share of foreign car manufacturers, which has decreased in the last two years from 53% to 33%. Those who suffer most from the decline in these sales are Japanese companies such as Toyota and Mitsubishi, the American companies GM, Ford and Tesla and the German companies, especially Volkswagen. Experts believe that the reason for such problems is continued state support from the Chinese authorities and increasing competition from local manufacturers. The influence of Chinese companies is growing especially in the EV market, whose sales now account for around 40% of total car sales in the Chinese market.

According to the China Passenger Car Association, the share of foreign automakers in China's auto market was 33% at the end of July. As of July 2022, foreign companies' sales in China accounted for more than half, or 53%. However, over the past two years, Chinese automakers have shown significant sales growth, reaching the same market share as foreign automakers at the end of 2022. At the same time, foreign companies' sales in China have steadily declined. In the second quarter of 2024 alone, VW's sales in China fell by 19%, BMW's by 4%, GM's by 29%, and Toyota's by 20%. In October 2023, Japan's Mitsubishi announced it would stop producing cars for the Chinese market through its local joint venture, a decision made after several years of declining sales. Honda, Hyundai and Ford have also reported significant workforce and production cuts in China due to the losses.

“The glory days of high sales growth and huge profits in China are over,” Michael Dunne, CEO of Dunne Insights, a consultancy focused on electric vehicles, told CNN. “If you are a mass brand in China, your days are numbered.” 

And Chinese electric vehicle manufacturers are not satisfied with the success achieved only at home. The country's car exports are skyrocketing: they rose more than 60% last year from the year before, reaching 4 million. By some macroeconomic measures, this has made China the world's largest auto exporter, ahead of Japan and Germany. Per the CPCA, more than a quarter of those exports are EVs.

For this reason, the founder of the company Nio, William Li, recently revealed plans to enter 25 countries and regions this year, including 16 markets for its Firefly sub-brand, moving from direct sales to local infrastructure partnerships.

SAIC Maxus, which aims to expand to 100 countries by the end of 2024, has registered export growth of 9% in the first quarter of 2025, reaching 25,000 units.

“Our customized pickups adapt to regional needs… improved suspensions for Latin American terrains and upgraded cooling systems for the Middle East,” he explained  to Zhao Aimin, CEO of SAIC Commercial Vehicle International and vice president of SAIC Maxus. He predicted that annual overseas sales will exceed 100,000 units, while light commercial vehicle exports are expected to double to 200,000 units by 2027.

The president of the SAIC group, Jia Jianxu, underlined the importance of "glocalization", announcing plans to launch 17 new global models and pursue localized production plans, including partnerships in ASEAN countries and the development of an African hub.

Supported by rising exports, China's automotive sector is therefore shifting gears, moving from domestic dominance to global resonance.

By 2030, Beijing's automakers could see their share of the global electric vehicle market double to around a third, with European companies suffering the biggest loss of market share, UBS forecasts. The possible “damage” to the automotive industries of Europe and North America has therefore triggered a wave of tariff increases on Chinese vehicles. But it's unclear whether higher import duties will be enough to halt the onslaught. 

As mentioned, it was a mix of factors that allowed Beijing to become a world leader in the production and export of electric vehicles, namely: state support, strong domestic supply chains, product innovation, intellectual property (IP) theft and forced technology transfers.

State support

The Chinese government, at both the federal and provincial levels, has made the competitiveness of electric vehicles a national priority. It is important to note that China's push into EVs stems from the realization, born in the mid-2000s, that Chinese firms were unlikely to become globally competitive in the dominant technological paradigm of internal combustion engines (ICE), despite stringent demands for technology transfer. Thus, Chinese leaders identified electric vehicles as a breakthrough, or “leapfrog,” technology that would allow China to develop a globally competitive domestic industry while breaking the country's dependence on foreign automotive technologies and, crucially, the imports of ICE cars (and their oil) that this entailed. 

For this, Beijing has invested a lot in the EV sector through subsidies, tax breaks and procurement contracts, promoting a robust national ecosystem. 

Domestic EV and battery manufacturers have, in fact, benefited from a series of mercantilist innovation policies, including more than $230 billion in subsidies from 2009 to 2023, in addition to local content requirements. Also their government initiative "Made in China 2025" has given priority to the development of electric vehicles, identifying a strategic value in the automotive economy and further stimulating the growth of the sector. 

An analyses conducted by Nikkei Asia, for example, found that five of the 10 companies that received the largest subsidies from the Chinese government in the first half of 2023 were local manufacturers of EVs or EV batteries. BYD Auto, China's largest electric vehicle maker, received 1.78 billion yuan, while state-owned SAIC Motor received more than 2 billion yuan.

Strong domestic supply chains 

In addition to financial support, the Chinese government has also prioritized and supported the development of infrastructure needed for EV production. The country has 1.8 million public charging points, more than 14 times the number of the United States, despite a population only four times larger. This coverage helps reduce range anxiety, which can be a significant barrier to EV adoption among consumers. This result was achieved largely thanks to state efforts.

Furthermore, the country's state electricity grid is an important provider of charging points and works closely with the relevant authorities to make it easier for motorists to charge their vehicles.

Registration policies are also encouraging EV growth. To combat pollution and congestion, several large Chinese cities limit the issuing of license plates to ICE vehicles, with a lottery system used in Beijing and auctions in Shanghai. In contrast, it is much easier to obtain licenses for EVs. Shanghai continued to offer free licenses for electric vehicles in 2023, while 100,000 plates were available to Beijing last year, 70% were for EVs.

In addition to the production of electric cars, China has also consolidated a global leadership role in the production of batteries for EVs. And because the battery represents typically around 40% of the cost of a new electric vehicle, the country's focus on developing accessible technologies in this field is now bearing fruit. 

Many Western EV manufacturers initially favored lithium nickel manganese cobalt (NMC) batteries, which offer longer range and higher performance. In contrast, Chinese companies have prioritized cheaper and more reliable lithium iron phosphate (LFP) technology.

Currently, Beijing holds more than half of the EV battery market. In 2022, approximately 60% of those sold globally were produced in China.

Major Chinese EV manufacturers, such as BYD, have exploited domestic advantages in battery production.

China's strength in battery production is underpinned by the good access it has secured to the raw materials used, thanks to a long-term strategy of buying stakes in key mining companies for minerals such as lithium. Beijing also checks most of the world's refining capacity when it comes to critical components. 

BYD's holdings in resource extraction enable the company to achieve discounts in the procurement of raw materials for battery production. Like other Chinese companies, BYD has benefited from strong government support, with direct grants of more than $3.7 billion between 2018 and 2022. Against this backdrop of generous government support, BYD plans to open additional battery manufacturing plants and consolidate much of its upstream sourcing, including acquiring ownership stakes in lithium mining operations, exploring joint ventures in nickel mining, and developing sodium ion batteries.

By focusing on improving LFP batteries, the Chinese company CATL has become the world's leading manufacturer of batteries for EVs, with over a third of the global market.

Factors like these are contributing to China's growing global dominance in the EV battery sector. According to SNE Research, in the first three quarters of 2023, six of the top ten companies in terms of global battery usage were Chinese, accounting for 62.9% of the global lithium battery market.

Finally, China can also count on secure automotive chip supply chains.

Product innovation

While China's EV industry has certainly benefited from intense government support, local companies have become increasingly innovative in their own right across multiple dimensions of product, process, business model and even customer experience innovation. In the EV battery sector, Chinese companies have also made major advances in chemistry, with some startups now working on developing storage batteries that they say will have a range of 2,000 kilometers (1,300 miles). With the battery accounting for up to 40% of an EV's value, the country's dominance in their production gives EV companies and locals a major advantage as a forerunner.

They are also aggressively innovating vehicle manufacturing processes, from robotic automation to digital manufacturing systems (i.e., digitized manufacturing execution systems integrated with the use of humanoid robots) to innovative aluminum die-casting processes. Chinese EV manufacturers are also accelerating the pace of product innovation. An evaluation detect that they are 30% faster at developing and launching a new car model than "traditional" American, European and Japanese automakers. 

In short, the quality and innovation of EVs from major Chinese manufacturers such as BYD, Li Auto, Xiaomi and others are increasingly rivaling or surpassing the offerings of Tesla or BMW.

Additionally, Chinese companies are leading the way in other aspects of EV technology, from innovative suspension systems to the integration of a range of new digital features; from autonomous driving to interactive voice control, up to multiple touch screens which allow you to do everything from watching movies to karaoke.

The most innovative technical solutions

One of the most interesting technical solutions proposed by Chinese manufacturers is represented by the adoption of independent electric motors on each wheel. This configuration, known as in-wheel motors, allows for more precise management of the vehicle's traction and stability, improving maneuverability in complex driving conditions (such as slippery surfaces or rough terrain). The elimination of traditional mechanical transmissions also allows for a reduction in weight and complexity, improving overall energy efficiency. 

Companies such as BYD and Protean Electric are actively engaged in this area, with BYD's DiSus-P system and Protean's wheel-integrated motors.

In the battery field, Chinese companies including BYD and NIO are investing in the development of solid-state batteries, a technology that promises higher energy density, faster charging times and greater safety than conventional lithium-ion batteries.

While BYD has invested heavily in lithium iron phosphate (LFP) technology for safety and cost reasons, it is also putting resources into research and development for solid-state batteries to remain competitive in the long term. BYD has also partnered with academic institutions and is working on semi-solid battery solutions as a transitional phase.

Unlike other companies, NIO, however, has openly expressed its commitment to advanced battery technology. In early 2021, the company announced plans to launch a 150 kWh solid-state battery for its vehicles, promising a range of more than 1,000 km (620 miles). At the same time, it has already implemented a network of battery swapping stations, which allows the complete replacement of the vehicle's battery in around five minutes, eliminating the waiting time for charging.

In turn, CATL (Contemporary Amperex Technology Co. Limited), one of the world's largest lithium-ion battery manufacturers, has invested heavily in solid-state technology, announcing plans for such batteries by 2025 or earlier.

Chinese automakers are also investing heavily in autonomous driving technologies, leveraging artificial intelligence and advanced sensors such as LiDAR (Light Detection and Ranging) to improve vehicle perception and navigation. 

Companies like XPeng and NIO are using multiple LiDAR units to improve 3D mapping, object detection, and environmental awareness.

Xpeng, in particular, offers the XPILOT platform, which integrates advanced driving assistance features, such as lane keeping, automatic urban traffic management and road sign recognition, with the aim of achieving increasingly higher levels of autonomy.

These companies are also using massive data sets collected from connected vehicles to train artificial intelligence models for perception, prediction and planning, critical components of autonomous driving, but which raise doubts on a possible use of such EVs as tools of espionage or sabotage.

Another area of ​​strong Chinese innovation concerns the interfaces between driver and vehicle. Many Chinese models adopt large displays (up to 20 inches), capacitive touch controls and retractable buttons, which are activated only when necessary. 

Some systems, for example, allow you to move the vehicle with a simple gesture on the display, tracing a line that the car will follow autonomously to facilitate maneuvers in confined spaces, a solution already implemented by Xpeng.

In 2024, Chinese automaker JiYue (a joint venture between Geely and Baidu) unveiled a "stylish sedan that can be controlled entirely by voice commands and a touch screen." 

Chinese manufacturers are also working to develop interactive control systems capable of performing functions such as analysis of drivers' health data and stress levels to provide driving suggestions and allow drivers and passengers to control car systems with voice and gestures.

Nio, in particular, offers augmented reality glasses from $350 for each seat in its cars and introduced a smartphone that interacts with the vehicle's autonomous driving system.

In May 2024, XPeng Motors announced plans to introduce its AI-based car operating system (XOS 5.1.0), aiming to bring fully autonomous driving (level 4) to China by 2025.

In some NIO and Xpeng models, it is possible to control functions such as the windows or the audio system via hand gestures or even with your gaze, improving ergonomics and reducing distractions while driving.

Gesture and gaze control (e.g. for infotainment, safety, driver monitoring) has also been introduced by NIO which offers the NOMI virtual assistant, an AI interface with an AMOLED display that interacts with passengers through movements and expressions. NOMI learns user preferences, automatically adjusting settings such as seat position and cabin temperature.

Additionally, NIO has implemented facial recognition for vehicle entry and settings customization.

To improve safety and personalize the driving experience, BYD has implemented a palm vein recognition system for vehicle access.

XPeng has integrated gesture control into its vehicles, allowing operations such as adjusting the volume and answering calls through hand movements. This feature is available both inside and outside the vehicle.

Additionally, XPeng uses facial recognition for vehicle access and settings customization.

Essentially, Chinese automakers are adopting different strategies to integrate advanced technologies into their vehicles. 

BYD, for example, focuses on advanced driver assistance with the "God's Eye" system and handheld recognition. NIO focuses on emotional interaction with the NOMI virtual assistant and facial recognition. XPeng offers versatile gesture control and facial recognition to enhance user interaction.​

All these innovations reflect Chinese automakers' commitment to improving the driving experience through advanced human-machine interaction technologies.

The steering wheels and seats are also the subject of innovation. On some models, the steering wheels integrate information displays, while others feature retractable steering wheels in autonomous driving mode. The seats, in addition to the traditional heating and ventilation functions, are equipped with biometric sensors to monitor parameters such as the driver's heart rate and stress, with the possibility of activating personalized massage programs.

BYD, Avatr and IM Motors, in particular, are implementing steering wheels with integrated touchpads, gesture controls and steer-by-wire technology, which eliminates the direct mechanical connection between steering wheel and wheels.

Smart steering wheels include capacitive sensors to detect the driver's hands, required for levels 2+ of autonomous driving (as on the Nio ET5 or Li Auto L9).Some vehicles, such as the IM L6, are starting to test retractable or hideable steering wheels, for future fully autonomous modes.

Nio, Li Auto and Voyah offer seats with heating, ventilation, massage and memory even in the rear seats.

Some companies have also introduced "Integrated intelligent functions" into the seats, i.e. the Heart rate and posture detection (Human Monitoring System, e.g. Xpeng G9) and the Smart Welcome Position, where the seat moves automatically to facilitate the entry and exit of passengers.

Many Chinese brands, such as BYD, NIO, Xpeng, Li Auto, and Zeekr, also fit head-up displays (HUD) in their vehicles that project essential information (speed, navigation, warnings) directly onto the windshield.

Some models use advanced augmented reality HUDs, overlaying navigation arrows or signs directly onto the real environment seen by the driver.

Some Chinese manufacturers are also adopting the die casting techniques. Nio and XPeng's supplier Guangdong Hongtu Technology (GHT) have already produced a 6,800-ton die casting machine. GHT has announced that it will begin developing a 12,000-ton die casting machine in collaboration with LK Technology, a supplier to Tesla. 

It is worth mentioning that one of the world pioneers of the die casting process was Idra srl, based in Brescia, Italy. Leading company in the production of aluminum and magnesium die casting machines in recent years 68 years old has designed, manufactured, customized and serviced over 13,000 machines worldwide. However, in 2008, the Hong Kong-based company LK Technology has purchased Hydra, another example of how Europe has allowed the jewels of its manufacturing sector, such as the German industrial robot manufacturer Kuka, to fall into Chinese hands.

The other side of the coin: the war on price reductions 

As mentioned, the enormous public subsidies, especially those given by local Chinese administrations, have also created problems for the national automotive industries, triggering a war on prices, mainly due to excess production (dumping). 

On October 9, 2024, Shen Jinjun, president of the Automobile Dealers Association in Cialready, said in a media interview that the culprits of the downward price war of automobiles are some manufacturers who ignore market demand and blindly produce to monopolize the market.

"The automotive market has entered the phase of stock competition. Manufacturing industries should produce as many orders as the brand has based on market demand. If you don't follow "sales-based production", I think it's goalless production. The end result is that there has been a serious imbalance between supply and demand, but manufacturers still ignore it. The pressure on sales and inventory has been passed on to downstream retailers,” Shen Jinjun said.

According to an analysis conducted by the experts of the aforementioned association, in August 2024 the overall discount rate of the new car market was 17.4%. From January to August of the same year, the "price war" caused a cumulative retail loss of 138 billion yuan in the new car market, preventing the industry's healthy development.

Previous research by the China Automobile Dealers Association showed that more than half of China's auto dealers suffered losses in the first half of 2024, with an average loss of 1.78 million yuan for dealerships. Furthermore, over 2,000 dealers have withdrawn from the network (or gone out of business), stopped cooperating with manufacturers and no longer sell models of related brands (or no longer provide after-sales services). This number is close to that of the previous year.

Shen Jinjun believes that this crisis is not simply due to "overcapacity", but that automotive production has not correctly moved from a "planned economy" to a "market economy". When demand is weak, automakers continue to produce according to set targets and pursue economies of scale, resulting in supply far exceeding demand and, therefore, intensifying the price war.