Lessons for India? Xi Jinping’s CCP gave Chinese EV makers over $231 billion as aid in last 15 years

China’s electric vehicle (EV) industry has received substantial government support, totalling at least $231 billion in subsidies and aid from 2009 to the end of last year.

Despite a decrease in the amount of support per vehicle, this significant investment has played a crucial role in the industry’s growth and development, according to research by Scott Kennedy, a China specialist at the Center for Strategic and International Studies.

Kennedy’s research highlights that more than half of this financial support came from sales tax exemptions. The remaining aid comprised nationally approved buyer rebates, government funding for infrastructure such as charging stations, government procurement of EVs, and support programs for research and development (R&D), as per a report by Bloomberg.

This research comes on the heels of the European Union’s announcement to increase tariffs on Chinese EV imports to as high as 48 per cent to counteract these subsidies. This decision follows similar actions by the United States, which has quadrupled tariffs on Chinese cars, and Canada, which is also considering new tariffs.

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Kennedy emphasized that Chinese EVs have significantly benefited from this massive industrial policy support, leading to improvements in quality and making them appealing to both domestic and international consumers. He urged that any effective response from the US, Europe, and other regions must recognize both the substantial support these vehicles receive and their rising quality.

Kennedy described his data as “highly conservative,” noting it does not account for local-level rebate programs in cities like Shanghai and Shenzhen that encourage owners of conventional cars to switch to EVs. Additionally, it excludes other forms of support such as low-cost land, electricity, and credit that some EV manufacturers can access, as well as support for battery companies and other parts of the supply chain.

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From 2018 to 2023, the per-vehicle support has decreased significantly, from $13,860 to just under $4,600. This is notably less than the $7,500 credit available to U.S. buyers of qualifying vehicles under the Inflation Reduction Act. Sales tax exemptions alone were worth almost $40 billion last year, rising sharply from under $10 billion in 2020 due to the rapid increase in EV sales.

Kennedy pointed out that if Chinese EVs were of poor quality, they wouldn’t pose a serious challenge to global automakers. He criticized Western automakers and governments for their slow and insufficient response to the competitive threat posed by Chinese EVs.

The findings underscore the impact of China’s aggressive support for its EV industry, which has not only fueled domestic adoption but also positioned Chinese EVs as strong competitors in the global market. This extensive support framework includes direct financial incentives, infrastructure development, and regulatory measures aimed at fostering a robust EV ecosystem.

The growing quality and competitive pricing of Chinese EVs have made them attractive to consumers worldwide, prompting concerns among global automakers about maintaining their market share. The increased tariffs by the EU, US, and Canada represent attempts to level the playing field and protect their domestic industries from what they perceive as unfair competition due to China’s substantial subsidies.

The extensive government support has been a cornerstone of the rapid growth and international competitiveness of China’s EV industry. As Chinese EVs continue to improve and capture more market share, it remains crucial for global automakers and policymakers to develop strategic responses that consider both the economic and technological advancements in this sector. This dynamic highlights the broader implications of industrial policy and international trade in shaping the future of the global automotive industry.