On the flip side, countries that excelled in gas or hybrid car production were less incentivized to pursue new types of vehicles. With hybrids, for instance, “[Japan] was already standing at the peak, so it failed to see why it needed to electrify [the auto industry]: I can already produce cars that are 40% more energy efficient than yours. It will take a long time for you to even catch up with me,” says He Hui, senior policy analyst and China regional co-lead at the International Council on Clean Transportation (ICCT), a nonprofit thinktank.
Plus, for China, EVs also had the potential to solve several other major problems, like curbing its severe air pollution, reducing its reliance on imported oil, and helping to rebuild the economy after the 2008 financial crisis. It seemed like a win-win for Beijing.
China already had some structural advantages in place. While building EVs needs a different technology, it still requires the cooperation of the auto supply chain, and China had a relatively good one. The manufacturing capabilities and cheap commodities that sustained its gas car factories could also be shifted to support a nascent EV industry.
So the Chinese government took steps to invest in related technologies as early as 2001; that year, EV technology was introduced as a priority science research project in China’s Five-Year-Plan, the country’s highest-level economic blueprint.
Then, in 2007, the industry got a significant boost when Wan Gang, an auto engineer who worked for Audi in Germany for a decade, became China’s minister of science and technology. Wan had been a big fan of EVs and tested Tesla’s first EV model Roadstar in 2008, the year it was released. People now credit Wan for making the national decision to go all-in on electric vehicles. Since then, EV development has been consistently prioritized in China’s national economic planning.
So what exactly did the government do?
It’s ingrained in the nature of the country’s economic system: the Chinese government is very good at focusing resources on the industries it wants to grow. It has been doing the same for semiconductors recently.
Starting in 2009, the country began handing out financial subsidies to EV companies for producing buses, taxis, or cars for individual consumers. That year, less than 500 EVs were sold in China. But more money meant companies could keep spending to improve their models. It also meant consumers could spend less to get an EV of their own.
From 2009 to 2022, the government poured over 200 billion RMB ($29 billion) into relevant subsidies and tax breaks. While the subsidy policy officially ended at the end of last year and was replaced by a more market-oriented system called “dual credits,” it already had its intended effect: the more than 6 million EVs sold in China in 2022 accounted for over half of global EV sales.