The electric vehicle (“EV”) sector is poised to disrupt and eventually take over the century-old automotive industry. Several countries have set ambitious green-energy targets in a bid to reduce their reliance on fossil fuels and cut down carbon emissions, and electric vehicles are at the forefront of these noble efforts. How these countries are working to achieve these long-term goals differs greatly, but in only a few short years, China has managed to create a massive electric vehicle sector from scratch that has barely any equals.
How has China achieved this feat in barely a decade? By pouring billions of dollars into EV startups, software, and technology firms and heavily subsidizing electric vehicle purchases. The United States, which is also striving to create an electric vehicle ecosystem that isn’t reliant on foreign supply chains, lags far behind Beijing.
However, by emulating some of China’s policies, the nation just may succeed in its efforts. Tesla Inc. (NASDAQ: TSLA), which is undoubtedly the world’s premier electric vehicle company, hasn’t received a lot of support from the U.S. government despite its immense accomplishments.
On the other hand, China has invested a lot of money in local EV startups. Chinese electric car maker XPeng, for instance, has received quite a lot of support from the state. Just last year, the company signed investment deals worth $700 million with the city of Guangzhou and the surrounding province of Guangdong. XPeng has also been granted access to low-interest loans, tax breaks and state subsidies as well as preferential terms on real estate. All of these state-funded initiatives have helped XPeng keep the cost of its electric vehicles relatively low, especially compared to companies such as Tesla, which offer high-quality EVs but at fairly high prices.
With the Chinese government firmly behind its fledgling EV sector, the industry has grown at a quick rate, outpacing the U.S. by a large margin. President Joe Biden’s infrastructure bill, with a massive $174 billion investment in the EV sector, is a great step toward building a sustainable electric vehicle ecosystem in America. These funds would be used to build a nationwide network of public EV charging infrastructure with hundreds of thousands of charging stations as well as provide tax breaks and rebates for electric vehicle purchases and aid EV makers. According to Biden, his infrastructure bill will give the U.S. a better edge against China as it competes to reach the top of the electric vehicle sector.
Is this plan too little, too late? Only time will tell.
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