This is how China uses the electric car market

China has heavily stuffed the pockets of its manufacturing companies with government subsidies electric cars, wind turbines and railway storage to gain a significant place in the green technology sector. It is the result of a new study by the German Kiel Institute for the World Economy, which comes a day after an investigation launched by the European Commission to confirm the concept of Beijing’s incentives for its wind turbine companies and a few months after that in relation to cars of the latest generation.

BYD’s growth was fueled by the Chinese government

Research provides a clear picture of the phenomenon. Chinese government subsidies for domestic industries are at least three, four or even nine times more than those provided by major EU and OECD countries, such as the United States or Germany. Among the biggest beneficiaries of Chinese government incentives is electric car maker BYD, which received about 2.1 billion euros in government funding in 2022 alone. State aid to BYD went from 220 million euros in 2020 to 2.1 billion euros two years later, according to a study published on April 10 by a German institute.

A large amount of money has made it easier for the big Chinese company to rise in the world market. BYB also benefits from the Beijing government’s support for Chinese electric battery manufacturers and discounts allocated to buyers of electric vehicles.

The company has weapons in its hands. BYD finds its key to success in the production of lithium batteries, using local resources. This is because China has the advantage of holding a large position in the raw materials needed for battery production: Beijing manufactures 77 percent of the world’s battery cells (Europe as a whole takes 7 percent), and alone controls 58 percent of lithium refining. 65 percent cobalt refining and 35 percent nickel refining. Factors that further add to the cause: batteries produced by BYD are among the cheapest in the world and also boast nearly the highest energy density, which translates into better performance in vehicles. This is an attractive feature for buyers, given that batteries represent about 40 percent of the cost of an electric vehicle.

What’s inside Chinese electric cars and why they cost less

The success of the Chinese company is therefore not surprising, since in the last quarter of 2023 it beat Tesla in sales of electric vehicles (with 526,409 units sold compared to 484,507 of the American car manufacturer). German research also shows that BYD receives more incentives than other national manufacturers, such as GAC, or foreign companies that produce within the borders of the Great Wall, such as Tesla or VW joint ventures.

Major Chinese wind turbine suppliers, such as Goldwing and Mingyang, are also benefiting greatly from government incentives. In the case of Mingyang, the subsidy increased from 20 million euros in 2020 to 52 million euros in 2022.

The need for dialogue with Beijing

Subsidies like those given to BYD have “allowed Chinese companies to expand rapidly, dominate the Chinese market and facilitate a growing expansion into European Union markets,” reads the study by the Kiel Institute, which advises the German government.

Then the warning of the authors of the study to the European Commission. Brussels must start negotiations with the Chinese government to pressure Beijing to remove subsidies to Chinese companies, in order to reduce the economic damage to the European market. German Chancellor Olaf Scholz’s trip to China next week represents an “excellent opportunity” to hold talks with Beijing, it continues. However, the German leader will have a lot to do: China refers to the investigation launched by the European Commission as a “conduct of protectionist and discriminatory policies” against Chinese companies.

Electric car maker BYD is one of the biggest beneficiaries of a huge government subsidy which #China goes into green technology. 👉 subsidies are widespread in 🇨🇳 & targeted at key technologies; The EU should negotiate on subsidies that are dangerous for… pic.twitter.com/UezzpZQkn0

– Kiel Institute (IfW Kiel) (@kielinstitute) April 10, 2024