China has spent at least $230 billion to build its EV industry, new study finds

BEIJING — China spent $230.8 billion over more than a decade to develop its electric car industry, according to analysis published Thursday by the U.S.-based Center for Strategic and International Studies.

The scale of government support represents 18.8% of total electric car sales between 2009 and 2023, said Scott Kennedy, trustee chair in Chinese Business and Economics at CSIS. He noted the ratio of such spending to EV sales has declined from more than 40% in the years prior to 2017, to just above 11% in 2023.

The findings come as the EU plans to impose tariffs on imports of Chinese electric cars over the use of subsidies in their production.

Last month, the U.S. announced it was raising duties on imports of Chinese electric vehicles to 100%.

Kennedy pointed out that Beijing’s support for electric cars has included non-monetary policies that favored domestic automakers over foreign ones. But he also noted that the U.S. has not created conditions that are as attractive as China’s for developing its own electric car industry.

“There are some exceptions, but in general Western automakers and governments have dilly dallied and not been aggressive enough,” he said. Kennedy had laid out seven policy initiatives in a report four years ago about potential trade tensions from Chinese electric cars.

Government subsidies did not necessarily go straight into car development. In the early years of China’s EV development, the Ministry of Finance said it found at least five companies cheated the government of over 1 billion yuan ($140 million).

China-made vehicles have also benefitted from growing penetration of electric cars in the country, cutting into a once-lucrative fuel-powered market for foreign automakers. The competition is so fierce that Bank of America analysts said this week that major U.S. automakers should leave China and focus their resources elsewhere.

“Independent auto analysts and Western automakers with whom I’ve spoken all agree that Chinese EV makers and battery producers have made tremendous progress and must be taken seriously,” Kennedy said.

But he pointed out that extensive government support and market growth for Chinese EV companies have yet to boost profits significantly.

“In a well-functioning market economy,” he said, “firms would more carefully gauge their investment in new capacity, and the emergence of such a sharp gap between supply and demand would likely result in industry consolidation.”

BYD‘s net profit per car has declined over the last 12 months to the equivalent of $739, according to analysis from CLSA as of the first quarter. Tesla‘s has dropped to $2,919, the data showed.

The EV industry in the last year has faced an intense price war, with car companies either slashing prices or launching lower-priced product lines.

Chinese electric car startup Nio, which is still operating at a loss, said last month it expects about 10 automakers will lose out on the China market, leaving 20 to 30 players.

The U.S. has been increasing its efforts to support electric cars. The Inflation Reduction Act, signed into law in August 2022, allocated $370 billion for promoting clean technologies.

Kennedy pointed out the legislation provides a $7,500 credit for qualifying electric car purchases. That’s in contrast to the average Chinese support per electric car purchase of $4,600 in 2023 — which is down from $13,860 in 2018.

— CNBC’s Dylan Butts contributed to this report.