By Edward Tse and Rachel Hu

November 2022

Already the world’s largest electric vehicle (EV) market and the largest EV exporter, China’s automotive industry continues to maintain its momentum. In the first half of 2022, EV sales in China rose to almost 18% of total car sales, while in comparison, EV sales made up only 11% in Europe and just over 5% in the US, of total car sales.

Industry Development and the Governance Model Behind It

Development of the EV industry in China has not been a coincidence. The Chinese governance model is the fundamental reason why the industry has developed so successfully and so fast. The structure of the governance model (Exhibit 1) responsible for the extraordinarily fast growth of EVs comprises of three layers. The top layer is the central government which has made the transition to EVs a key strategic component of China’s long-term development. Financial subsidies (such as the 2012 “Interim Measures for the Management of Financial Incentive Funds for Technological Innovation in the New Energy Vehicle Industry”) have been a major policy initiative to promote the development of EVs over the past decade. Going forward, the central government aims to have charging infrastructure for more than 20 million cars in place by 2025. It has set the goal of increasing the share of EVs in sales of all vehicles to 40% by 2030.