Think Tank Says China Invested at Least $230B to Establish EV Industry

Research from a Washington-based think tank has revealed that China invested at least $230 billion into its electric-vehicle industry to “flood the market” with more affordable Chinese-made battery electric vehicles (BEV). The analysis is in line with the European Commission’s sentiment on the effect of Beijing’s subsidies on the global BEV industry. Furthermore, the Center for Strategic and International Studies (CSIS) notes that this figure is a “highly conservative estimate” of the funds China has pumped into its EV sector.

The east Asian nation’s investment in electric cars dwarfs anything any other country has spent on new energy vehicles over the past decade. As a result, China is home to a massive electric vehicle industry with 200 EV producers jostling for supremacy. With the sector producing much more than the domestic buyers can reasonably consume, China began exporting EVs en masse to the European market before EU leaders launched an investigation into Beijing’s EV subsidies.

Thanks to the decade-long cash infusion from Beijing, China’s auto sector is poised to reach 10 million in electric vehicle sales this year, making it the largest EV market on the globe ahead of both the United States and Europe. CSIS’s research says the Chinese government pumped $230.8 billion into its EV industry from 2009 to 2023, at an average of around $6.74 billion per year for the first nine years. The funding then tripled over the next three years before spiking even further in 2021.

The think tank’s research was based on five key areas: government EV purchases, national rebate programs, exemption from the country’s 10% sales tax, development programs for electric vehicle manufacturers and government funding for beneficial infrastructure. The sales tax coupled with the buyers’ rebate, which lasted until 2023, constituted most of the Chinese government’s support.

The Center for Strategic and International Studies believes these estimates are on the low end because they don’t account for factors such as rebate programs run by local governments or the provision of low-cost electricity, credit and land to electric-vehicle companies. In addition, its analysis didn’t include subsidies for other areas of the auto supply chain, such as mining and processing EV raw materials as well as the development of electric vehicle batteries.

As such, EV battery giant CATL, which received a whopping $809.2 million in subsidies last year alone, didn’t affect the research findings. Unfortunately, Chinese EV makers may be unable to leverage their affordability to gain a foothold in major foreign markets. The U.S. has already started levying a 100% tariff on Chinese EVs, and the EU is also set to levy provisional tariffs.

Other countries are also supporting their domestic EV industries, and companies such as Rivian Automotive Inc. (NASDAQ: RIVN) may be reaping the benefits of some of those initiatives, includes sales incentives and rebates.

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