China’s booming electric vehicle (EV) market made waves in India recently when Bhavish Aggarwal, founder of Ola Electric, claimed his company was the world’s largest electric two-wheeler manufacturer and the fourth-largest EV company—with a footnote that this excludes China. Between January and July, Ola sold nearly 270,000 electric scooters, capturing 42% of the Indian market, with TVS Motor (17%) trailing in second place. This is a notable achievement, but the exclusion of China from a global comparison is glaring.
Globally, Chinese companies dominate the EV landscape. According to Counterpoint Research, all the top five electric two-wheeler manufacturers are Chinese, holding a combined global market share of about 72%.
China’s dominance also extends to the four-wheeler EV segment, bolstered by a vast domestic market and robust government support. As of the end of 2023, China had the world’s largest electric car stock, with 21.8 million units, far surpassing the European Union (8.1 million) and the US (4.8 million), according to the International Energy Agency.
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Significantly, the Chinese four-wheeler EV market is not just large but also rapidly evolving. In July, EV sales in China, including both pure EVs and plug-in hybrids, surged 37% year-on-year. EVs outsold internal combustion engine (ICE) cars, making up 50.7% of all four-wheelers sold in the country, according to the China Passenger Car Association. In contrast, only 18% of total car sales in the US during the March-ended quarter were electric or hybrids, underscoring the significant role of government intervention in China’s EV success.
Powering EVs
The growth in the Chinese EV market coincided with developments in the battery segment. Battery prices have been falling in China, thanks to intense competition and declining raw material costs. Six of the top 10 battery suppliers globally are Chinese, and they have been scaling up capacity, leading inevitably to price wars. Last year, the price of lithium iron phosphate (LFP) batteries dropped by 51%, according to Bloomberg.
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The industry is also investing in research and development. In April, battery maker CATL launched an LFP battery, with a range of 1,000 km on a single charge. This month, Zeeker, a car maker, said its new batteries could go from 10% charge to 80% charge in a little over 10 minutes at its charging stations. China has over 2.7 million public charging stations, and growing. Last week, car maker Nio said it planned to build battery stations in each of the country’s 2,844 counties by June 2025.
Tweaking support
China’s EV growth has been driven by substantial government support, which has been tailored—rebates, tax exemptions, infrastructure subsidies and so on— to the market’s evolving needs. For instance, between 2009 and 2017, the government provided $37.8 billion in rebates for EV purchases. However, these rebates were gradually phased out, reaching zero by 2023, according to calculations by Washington, DC-based Center for Strategic and International Studies (CSIS).
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On the other hand, it has been increasing subsidies to other parts of the value chain. For example, it increased subsidies to battery maker CATL from $76.7 million in 2018 to $809.2 million in 2023, according to CSIS. CSIS estimates that Chinese government support to the EV industry (not including subsidies to battery makers such as CATL) totalled $230.9 billion between 2009 and 2023.
Overcapacity concerns
Government push and optimism about growing demand has led the Chinese EV industry to build huge capacities. Now, there are questions if they stretched themselves thin. Within China, the excess supply has led to discounts and price cuts, which helped grow the market, but eroded margins. A recent report by AlixPartners, a consultancy, said only 19 of the country’s 137 electric car companies will be profitable by the end of this decade.
In response, Chinese companies are increasingly eyeing export markets. The global market share of Chinese EV brands is expected to rise to 13% by 2030, up from about 3% today. Currently, their market penetration stands at 6% in Europe and 1% in North America, with projections to grow to 12% and 3%, respectively. However, these markets are pushing back, arguing that Chinese brands have benefited unfairly from government subsidies. But for now, China remains a dominant force in the EV sector that cannot be overlooked.
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