The competition has concluded, and we have come up short. In terms of lithium-ion battery technology, the Chinese have emerged victorious. They identified a product where they could excel and have now secured dominance.
China committed to this path early on. Since 2001, China has aimed for a leading role in lithium-ion battery production, making it a central part of its Five Year Plan. After “inviting” numerous joint venture partners to China and mastering vehicle manufacturing, it was realized that they could not outpace Americans and Europeans in innovation regarding internal combustion engine (ICE) vehicles.
Consequently, substantial government backing for an EV battery industry began in 2009, a venture not pursued by foreign competitors. From 2009 to 2023, the Chinese government invested an impressive $230 billion in both batteries and electric vehicles (EVs). This included benefits like low-cost land, tax incentives, and other support. Major Chinese battery manufacturers such as CATL, BYD, CALB, and Gotion have profited significantly and dominate the battery market domestically and internationally.
Complete control over the supply chain. In addition to EV battery manufacturing, China has secured control over the entire supply chain for EV batteries. This encompasses materials sourced from China as well as those from other regions. For instance, over the next decade, partially or fully Chinese-owned companies will be responsible for producing more than 90% of Africa’s lithium supply! To exacerbate the situation, China’s production capacity for EV batteries already surpasses global demand by approximately 400%.
Is it any surprise that Chinese EVs are so affordable? This situation explains how they can offer their EVs at such low prices—most of the materials used in the battery production have received government subsidies. This pricing edge, along with the industry’s excess capacity, allows them to export their EVs to multiple global markets.
Is there any way to counter this? Although it seems we have nearly lost the battle in liquid electrolyte lithium-ion batteries, we should not lose hope. We must construct our own lithium-ion battery manufacturing facilities and develop supply chains to ensure that our EV industry has a reliable battery source that is not susceptible to political disruptions.
The Inflation Reduction Act has already triggered significant investments in domestic lithium-ion battery manufacturing, bringing this goal closer to fruition. However, we need to recognize that lithium-ion batteries are nearing their performance ceilings, necessitating a shift to alternatives.
Looking ahead, the key advancement lies in the next generation of EV battery technology. That is solid-state batteries, an area where we have not yet surrendered leadership to the Chinese. It represents the best opportunity for the future of our automotive industry.
Solid-state batteries address many of our current EV challenges. The upcoming solid-state EV batteries promise solutions to numerous issues faced with electric vehicles today. These batteries will charge more quickly, offer higher energy density leading to reduced weight, and be considerably safer than existing lithium-ion batteries, eliminating the risk of thermal runaway. Even better, solid-state batteries do not require graphite, a material over which China holds near-total control.
Picture an electric vehicle with a range of 1,000 miles, a charging time of five minutes, standard weight, and a minimal fire risk. Such advancements would significantly resolve many of the barriers to EV adoption!
We need to seize the moment for solid-state battery development without delay. To achieve a competitive edge in the development of solid-state EV batteries, we need to increase funding for research and development, expedite the commercialization of laboratory innovations, and create a sheltered environment (like military-related projects) to prepare these batteries for mass production as swiftly as possible.
The race for solid-state batteries has begun, and we are not alone in this competition. Besides a Chinese consortium backed by battery manufacturer CATL and automaker BYD, Japan’s Toyota, Nissan, and Honda, along with Korea’s Samsung, are also vigorously pursuing solid-state batteries. Significant hurdles facing all solid-state battery developers include scaling production and reducing costs.
In the U.S., QuantumScape is the largest company involved with solid-state batteries, already having an agreement with the Volkswagen Group. However, time is of the essence—Samsung is targeting production in 2027, while Toyota and Nissan are aiming for 2028. Honda is establishing a demonstration production line for solid-state batteries, with plans for production in the latter half of the decade.
It’s a crucial moment. The Chinese have already gained supremacy in lithium-ion batteries, but we still have a shot at leading in the solid-state battery domain. The clock is ticking…
The U.S. hesitated, and China established a leading electric vehicle market.
“They’re dominating globally, with the exception of North America,” commented Lei Xing, an expert in the Chinese automotive sector. “The U.S. will be the final frontier.”
Over the past 15 years, China has developed a public charging network exceeding 10 million stations, encouraged billions of drivers to switch to electric through subsidies and various incentives, and launched more than 100 EV brands with a wide range of pricing options. This initiative is a prime example of “China Speed,” a phrase Xing used to describe the nation’s rapid development.
The pace and magnitude of this change have propelled China ahead of the U.S. and all other countries in the electric vehicle transition, while simultaneously positioning Chinese automakers at the forefront to lead the market for years ahead. For instance, industry data reveals that in both July and August of 2024, over half of all vehicle sales in China were electric or hybrid.
The U.S. is, quite frankly, trying to catch up. The Biden administration has prioritized the shift to EVs, stating that by 2030, it aims for half of all vehicle sales to be electric, plug-in hybrid, or fuel cell EVs. Additionally, the White House has attempted to complicate matters for China by imposing high tariffs on EVs made in China, a strategy designed to protect U.S. car manufacturers.
However, due to limited access to supply chains, slow development of EV infrastructure, and a cultural preference among American drivers for gas-powered vehicles, it remains uncertain if these targets can be met. John Bozzella, CEO of the Alliance for Automotive Innovation, which represents U.S. and foreign automakers and other industry stakeholders, has described the Biden administration’s objectives as the “ragged edge of achievable.”
The critics may be justified: The adoption of EVs and the necessary energy infrastructure development has progressed at a sluggish pace compared to China. According to the Federal Highway Administration, as of August 29, there were 192,500 public chargers installed across the U.S. — a figure that has doubled during the Biden-Harris administration, with 1,000 new stations being activated weekly. Biden has pledged to establish 500,000 charging stations nationwide by 2030.
To achieve that objective, his administration has allocated $7.5 billion for electric charging infrastructure. Out of that total, $5 billion is specifically directed toward enhancing a fast-charging network along highways. According to the Highway Administration, only about 69 of these fast chargers are currently operational across eight states.
The sluggish pace of infrastructure development has hindered adoption, as drivers experience “range anxiety.” As of June, battery electric vehicles and plug-in hybrids made up less than 10% of vehicle sales in the U.S., based on federal statistics.
“China has an advantage in a competition that is just beginning,” stated Baratunde Cola, CEO and founder of Carbice, which produces nanotubes that help prevent electric vehicles from overheating. “Everyone is still preparing their starting line.”
China’s ascendance in the electric vehicle market hasn’t occurred overnight. The main catalyst: China’s acknowledgment more than ten years ago that electric vehicles represented a pivotal innovation in transportation, similar to the impact of Henry Ford on auto manufacturing in the early 20th century.
Intent on advancing, Beijing committed its economic resources to the development of electric vehicles, mirroring the centrally controlled industrial strategy that facilitated Japan’s automotive growth in the 1970s and ’80s.
In 2009, the Chinese government initiated a pilot subsidy program to establish a foundation for an electric vehicle ecosystem. Named “Ten Cities and Thousand Vehicles,” the program aimed to subsidize new electric and hybrid vehicles in public transportation, such as buses and taxis, according to Xing.
Beginning in 2013, subsidies became available to individual consumers through a tiered system based on the range of the electric vehicle, as explained by Xing. The government discontinued these subsidies in 2022, but by that time, China had already made significant strides toward dominating the EV market. The country also provided an exemption from the 10% sales tax to help reduce vehicle costs, which is set to phase out in 2027.
Overall, the Chinese government distributed $231 billion in subsidies from 2009 to 2023, as reported by the Center for Strategic and International Studies.
This “carrot” strategy to stimulate demand proved to be very effective. The International Energy Agency reported that new electric car registrations in China reached 8.1 million in 2023, marking a 35% increase compared to the previous year.
China has also gained an edge by creating an extensive network of chargers. As of June, the National Energy Administration reported that China had 10.2 million EV chargers, reflecting a 54% rise from the previous year.
China has surpassed the U.S. not only in the number of chargers but also in their quality. Part of this, according to Xing, can be attributed to the country’s streamlined charging infrastructure, which features a single standard plug for all vehicles.
“You don’t need to worry about which type of plugs or adapters to use at different charging stations,” he noted.
Another advantage for China is its access to crucial raw materials. The International Energy Agency estimates that by 2030, 90% of graphite and 77% of refined rare earth elements—essential components in EV and battery production—will originate from China. In contrast, the U.S. currently imports all of its graphite, with one-third of that supply sourced from China, as reported by the Alliance for Automotive Innovation.
Being close to semiconductor chip manufacturing also gives China an advantage, according to Hooman Shahidi, CEO and co-founder of EVPassport, in comments to CBS MoneyWatch. Taiwan, located near China, produces approximately 90% of the world’s advanced chips, as noted by the United States Institute for Peace.
“The U.S. and Canada are essentially trying to reduce their dependence on China, but executing that is more challenging,” stated Xing. “I believe that will require at least ten years.”
Is there still a chance for the U.S. to catch up?
American drivers have been notably slower to embrace electric vehicles.
“We have a larger population of laggards compared to early adopters,” remarked Shahidi, who also advises the Biden administration on EV charging infrastructure policy.
Nonetheless, experts suggest it’s premature to dismiss America, which possesses both the resources and technical know-how—if not always the political resolve—to rapidly enhance its electric transportation systems. The next several years will be the “most crucial” time for domestic EV development, noted Bozzella in a blog post for the Alliance for Automotive Innovation.
In March, the Biden administration reduced its projection for electric vehicle sales to account for half of the market by 2030. This adjustment “should allow the market and supply chains the opportunity to catch up and potentially overtake China,” Bozzella noted.
So far, Washington has established a “great tempo” by setting mandates and incentives to achieve these aims, according to Shahidi. However, he believes that additional efforts could be made to incentivize companies focused on supply chains and logistics, something China has effectively accomplished.
“We need to encourage and empower the ancillary economy associated with electrification,” Shahidi noted.
To gain an advantage, Cola, who leads Carbice, stated that the U.S. must invest more in robotics and automating assembly, put money into advanced materials, and strengthen the production of critical mineral supplies to lessen dependence on China.
“If we concentrate on accelerating new technologies like carbon nanotubes, and increase our commitment to robotics, we could catch up with China and become the global leader within a decade,” he mentioned.
A key focus for the U.S. will be the expansion of charging infrastructure. “To increase the deployment of chargers, we require more personnel to implement them,” Shahidi pointed out.
As federal and local efforts aim to address the clean energy workforce gaps, the U.S. is making progress. The Federal Highway Administration indicates that projects funded by the federal government are currently in progress for over 24,100 EV chargers, with more to come.
“We anticipate that hundreds of federally-funded chargers will be operational this year, thousands in the next, and potentially hundreds of thousands by the end of the decade,” a spokesperson from the Highway Administration said.
Chinese manufacturers produce over half of all electric vehicles (EVs) globally. As they grow in scale, cost effectiveness, and expertise, there is increasing speculation that Chinese EV brands will ultimately dominate the global market.
This month, the World Economic Forum will meet in Dalian for the Annual Meeting of the New Champions to discuss the “next frontiers for growth.” The discussions occur amidst various trends—including decarbonization, artificial intelligence, rapid digitization, and the rise of e-commerce—that present significant opportunities.
The potential of the global auto industry, especially for Chinese manufacturers, should not be underestimated. The conversations should focus on a collaborative approach towards a promising future rather than being driven by fear.
Chinese manufacturers produce more than half of the electric vehicles (EVs) worldwide
Research indicates that consumer interest in purchasing an EV is growing, primarily driven by price.
Manufacturers in China can build on their pricing advantages and compete effectively with Western manufacturers.
Chinese automakers create more than half of the electric vehicles (EVs) in the world. As they enhance their scale, cost efficiencies, and expertise, concerns are rising that Chinese EV brands may saturate the global market.
The World Economic Forum will meet in Dalian shortly for the Annual Meeting of the New Champions to explore the “next frontiers for growth.” The meeting is scheduled at a time when various trends—including decarbonization, artificial intelligence, rapid digitization, and accelerating e-commerce—open up substantial opportunities.
The potential of the global auto sector, particularly for Chinese manufacturers, should not be ignored. The dialogue should be guided by a spirit of collaboration towards a brighter future rather than fear.
According to AlixPartners’ recently released Electric Vehicle Consumer Sentiment Survey, China’s EV market, currently the largest in the world, is set to thrive. Approximately 97% of 1,000 respondents based in China stated that their next vehicle purchase is likely to be an EV, compared to 35% in the U.S. and 43% in Europe. Chinese consumers overwhelmingly show a willingness to consider a domestic model. The bottom line is that China has a distinct advantage in the EV race. However, that could change.
Our research, which surveyed a total of 9,000 participants across eight countries, found that while interest in EVs has softened recently, the growth outlook remains robust through 2035. The challenge for Chinese automakers is to determine what part they will play in the global industry as international competitors take measures to catch up in a slow but steadily expanding EV market.
So far, Chinese automakers have faced challenges in succeeding in mature markets like Western Europe and the U.S. While EVs present a potential opportunity for establishing a more significant presence, Chinese brands must take several factors into account regarding their future roles.
Can China sustain its cost advantage?
While Chinese EVs are not commonly seen on European or American roads, they are becoming increasingly recognized. More than half of participants in the U.S., Germany, UK, and France are aware of at least one Chinese brand, such as BYD, Leap Motor, and Nio. Overall, respondents indicate they would consider a Chinese EV if it was priced 20% lower than a comparable non-Chinese model.
Electric vehicles (EVs) in China have a selling price of about $34,400, which is significantly lower than the US average of $55,242. Several factors contribute to this price difference. Chinese manufacturers enjoy a significant cost benefit due to lower labor costs, higher production scales, substantial government support, and more favorable battery expenses (with many EV batteries or their components being sourced from China).
There are, however, external factors that could affect China’s ability to maintain this edge. For example, vehicles manufactured in China currently face a heavy tariff of 27.5% in the US, and there’s a possibility that these tariffs could increase dramatically.
Nonetheless, China has demonstrated the capability to launch a competitive vehicle export initiative despite trade obstacles and became the world’s top auto exporter in 2023, largely due to exporting internal-combustion engine vehicles to countries like Russia and Mexico. The challenge will be to find a way to replicate that achievement with EVs in more developed markets.
Chinese brands are becoming more attractive due to their impressive vehicle styling, user-friendly components, and cutting-edge technology, including advanced safety and connectivity features. This has allowed these brands to transition from being perceived as underperformers in their home market (the largest in the world) to holding over 50% market share in China.
The global market for EVs seems ready for significant changes. While Tesla has been a leader in the international EV space, other manufacturers in the US and Europe have been slow to adapt, primarily due to high vehicle prices, a lack of appealing features and designs, limited availability, or a combination of these factors.
In contrast to many Western automakers, Chinese brands have adopted a different approach. Established brands from the West often prioritize features that are not immediately visible to buyers—such as ride quality, handling, or vibration—whereas Chinese manufacturers focus on capturing the immediate sensory experience of drivers. This approach is being carried over to the EV segment. Looking ahead, the challenge will be to sustain this advantage in an industry where many global competitors have significantly more resources for research and development.
We are still in the early stages of the electric vehicle transformation in the automotive sector. Of the approximately 90 million light vehicles anticipated to be sold in 2024, only 17 million are expected to be electric, with the majority sold in China.
A critical element in stimulating worldwide demand is tackling the issues that potential buyers cite as barriers to choosing an EV. These barriers include concerns about battery range, the cost of vehicles, and, most importantly, worries about charging infrastructure.
Our research on EVs indicates that a major reason for the demand for Chinese electric vehicles is consumers’ confidence in how promptly and effectively these issues are being handled in China. In contrast, consumers in the West seem less assured. For instance, in the US, 43% of potential EV buyers express concern about the inadequate number of charging stations available (while this figure is nearly one-third less in China, where millions of charging points are operational). Similar advancements need to occur in other regions worldwide.
The electric vehicle evolution presents numerous opportunities for different players across the globe; however, with every success story, there will also be those who struggle to keep pace. If Chinese EV manufacturers aim to enhance their standing internationally, they must actively preserve their advantages while also addressing the challenges that persist.
