Why are Chinese car manufacturers able to advance so quickly?

Despite the ongoing debates surrounding electric vehicles (such as whether they are truly more sustainable and whether they can be produced profitably) most car manufacturers still consider increasing the production of electric vehicles an important goal. Competition in this field is heavily influenced by battery technology. A longer driving range is particularly valuable because charging infrastructure is still insufficient or overloaded in many places, making range an important factor for consumers. From the perspective of a car manufacturer, two key elements are required to increase driving range. First, access to the raw materials needed for batteries (or to fully manufactured batteries) is essential. Second, companies must be capable of developing battery technologies with higher energy density (MIT Technology Review, 2023).

Battery production integrated into the supply chain – and often into the company itself

However, the raw materials required for batteries are limited, and the supply chain is highly concentrated. Automakers are therefore seeking partnerships that enable them to develop new electric models. Companies that have achieved surprising success in the automotive industry with fully electric vehicles (such as Tesla and the Chinese company BYD) have integrated battery manufacturing into their own supply chains. Going even further, BYD manufactures its batteries entirely in-house (Reuters, 2023). This provides such a significant competitive advantage in the current environment that it can be said, without exaggeration, that their rapid progress is largely due to this factor. The key question, therefore, is whether battery manufacturing capabilities exist within the company or within its supply chain. Among other benefits, this also allows manufacturers to produce electric vehicles at lower costs. Many Chinese manufacturers possess this capability and also have relatively easy access to the necessary raw materials (carsguide.com, 2023).

State subsidies supporting faster development

It should also not be forgotten that Chinese manufacturers benefit from state support. From the early days of electric mobility, the Chinese government provided substantial subsidies, totaling approximately 173 billion USD between 2009 and 2022 (reason.com, 2024). To nuance the picture, it should be noted that the reliability of Chinese data is sometimes difficult to verify, meaning the actual amount of support may be even higher. These subsidies have triggered significant criticism, particularly in the North American market (wrp.org, 2024). However, such subsidies are far less relevant for the large companies that have already expanded internationally. For example, BYD recently reported revenues of nearly 120 billion USD in a single year, while also remaining profitable. The criticism is justified in the sense that government intervention in markets is generally not beneficial in the long term. However, similar examples can be found elsewhere. For instance, during General Motors’ accelerator pedal scandal in 2014, the U.S. government intervened to prevent the company from going bankrupt (Reuters, 2014). Likewise, in response to Chinese subsidies, Ford received 9.2 billion USD in support in 2023 to help catch up in electric vehicle manufacturing (Bloomberg, 2023). China undoubtedly plays an active role in shaping the market, but comparable, though sometimes less extensive, interventions can also be observed elsewhere. Moreover, in order to strengthen domestic electric vehicle industries, it is likely that more examples similar to the support provided to Ford will appear in the future, not only in the United States but possibly in Europe as well.

Expansion plans slowed by tariffs

The largest automotive markets in the world are China, the United States, and the European Union. In 2024, nearly 31.5 million passenger vehicles were sold in China, representing almost 33% of global passenger car sales. In comparison, approximately 16 million vehicles were sold in the United States and 12.5 million in the European Union (OICA, 2025). For Chinese manufacturers, the domestic market is already well established. Therefore, expansion into the United States and the European Union was a logical step given the size of these markets. Learning from earlier failures, product quality is no longer an issue from a regulatory perspective; Chinese vehicles meet the requirements necessary to be sold on both continents. Put simply: China has learned how to manufacture cars. However, Chinese electric vehicles have generated strong opposition in the United States. Tariffs imposed on them have been increased to four times their previous levels (bbc.com, 2024; euronews, 2024). Similarly, although less drastically, the European Union has also introduced tariffs. A further question has emerged regarding vehicles manufactured in China but belonging to European brands: should they be treated as Chinese cars (since they are produced and imported from China) or as domestic vehicles (since the brand’s headquarters are located within the EU)? In practice, tariffs treat them as Chinese vehicles (euronews, 2024). As a result, this policy has further increased the already high price of electric vehicles on the European market. The largest European manufacturers opposed the introduction of these tariffs and did not consider them necessary to protect the European market (Reuters, 2024). Looking at sales statistics, this position is not surprising. For German automakers in particular, the Chinese market is extremely important, and they fear that China could respond with retaliatory tariffs. Moreover, there are concerns related to battery supply chains, as manufacturers are reluctant to purchase batteries (most of which originate from China) at even higher prices. In response to political uncertainty and tariffs, Chinese manufacturers have already begun adapting their strategies. On December 22, 2023, the Chinese company BYD announced that it would build a factory in Szeged, Hungary (byd.com, 2023). This development will make it much more difficult to slow Chinese expansion through tariffs, as vehicles produced within the EU cannot easily be subjected to punitive import duties.