As the global automobile demand shifts to environmentally friendly electric cars, the U.S. is lagging behind China in EV innovation.

President Jinping promotes electric carsIn May 2014, Chinese President Xi Jinping expressed interest in the EV market, stating, “developing new energy vehicles is essential for China’s transformation from a big automobile country to a powerful automobile country. We should increase research and development, seriously analyze the market, adjust existing policy and develop new products to meet the needs of different customers. This can make a strong contribution to economic growth.

Since Jinping’s statement, the country has enacted several policies to incentivize citizens to make the transition to electric cars. These include:

  • Zero emissions vehicle mandate. In 2019, each Chinese vehicle manufacturer and importer is required to make or import at least 10% electric vehicles. The percentage will increase to 12% in 2020. These regulations apply to any company that manufacturers or imports more than 30,000 vehicles in China. Companies that fail to achieve the required percentages may purchase credits from companies that over-comply.source
  • Subsidies. The Chinese government provides subsidies to manufacturers of electric vehicles. These subsidies have been steadily reduced in recent years. In June 2019, many of these subsidies were cut roughly in half, and others were eliminated.
  • All-electric plug-in cars with a range over 400 km are now eligible for subsidies of RMB 25,000 (approximately $3600).
  • All-electric plug-in cars with a range of 250–400 km are now eligible for subsidies of RMB 18,000 (approximately $2600).
  • All-electric plug-in cars with a range of less than 250 km are no longer eligible for subsidies.
  • Plug-in hybrid cars are now eligible for subsidies of RMB 10,000 (approximately $1,500).

While California made Tesla captured attention in recent years with semi-affordable EV’s for average American, China’s policies have encouraged citizens to make the transition to electric. As a result, more EV manufacturers are popping up in China, interrupting U.S. supply chains.

Tesla electric car

“Over the next five years we anticipate Chinese players across the EV supply chain to aggressively enter the overseas market,” UBS analysts wrote in a note Wednesday. “We believe China materials costs are lower than the overseas market. If this advantage can sustain, China could realize a cost advantage over ex-China players.”

Over the next 5 years, China’s electric vehicle market is expected to have a compound annual growth rate (CAGR) of 25%.

Engineers predict that electric cars will cost roughly the same as internal combustion engine cars by 2030.

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