CHINA PAID BILLIONS IN AID TO LOCAL EV MAKERS, INCLUDING TESLA, TO DOMINATE THE MARKET: STUDY

BYD was the biggest beneficiary of China’s support scheme, raking $3.7 billion in direct subsidies.

China spent billions of dollars to boost the competitiveness of its local electric vehicle industry, according to a new study published last week by Germany’s Kiel Institute for the World Economy quoted by Bloomberg.

The think tank, which advises the German government, said that China’s aid to domestic new energy vehicles amounted to roughly $5.6 billion until 2022 when the direct payments to manufacturers were phased out. New energy vehicles (NEVs) include all-electric cars (EVs), plug-in hybrids (PHEVs) and fuel cell vehicles (FCEVs).

The biggest beneficiary of China’s support scheme was BYD, which received $3.7B in direct aid from 2018 to 2022. The lion’s share was awarded in 2022, with BYD getting $2.2B from the Chinese government.

More Stories Like This

• Half Of All Tesla EVs Are Made In China
• A Quarter Of EVs Sold In Europe This Year Will Be Made In China, NGO Predicts
• How China Became A Battery Manufacturing Juggernaut
• Chinese Electric Cars Are Clogging European Ports: Report
• The U.S. Won’t Let China Flood Its Auto Market, Treasury Secretary Says
• These Are The Chinese EVs Trying To Take Over Europe. Is The U.S. Next? (Updated)

Tesla, which competes directly with BYD both on the domestic market and on a global scale, was the second largest beneficiary of China’s support scheme in 2022. The American-based EV maker received about $426 million from the Chinese government for the cars it manufactured at its Shanghai facility.

China’s direct purchase subsidy scheme was axed at the end of 2022, according to the German think tank that published the study. The scheme awarded between $1,380 and $2,400 on average for each new energy vehicle manufactured in China between 2010 and 2022.

Compared to other countries that offer some sort of subsidy for the purchase of a new environmentally friendly vehicle, including the United States, the biggest difference in China was that the state gave the money to the car makers and not the buyer.

Even though this particular support scheme has been phased out, China’s battery electric vehicle buyers are exempt from paying a 10% purchase tax. In 2024 and 2025, the country will apply a complete purchase tax exemption for all NEVs, not just EVs, amounting to savings of about $4,200 on average per vehicle, according to the institute. This exemption will be halved in 2026 and 2027.

The think added that besides the direct subsidies applied until 2022, China’s EV industry also benefited from subsidized pricing on important materials such as steel and batteries, as well as discriminatory government procurement, both of which are hard to measure.

“The very comprehensive and opaque Chinese subsidy system blurs the difference between domestic subsidies which do not distort trade and subsidies intended to help domestic companies to conquer export markets and thus are trade distortive,” Germany’s Kiel Institute for the World Economy said.

The figures put things in perspective after the European Commission officially launched an anti-subsidy investigation into the import of battery-powered vehicles from China in October 2023. The Commission argued that it found sufficient evidence demonstrating that EV imports from China benefit from subsidies that allow them to rapidly increase their market share in the European Union. This could ultimately threaten the Bloc’s domestic industry and demotivate investments, the Commission said.

If the European Commission’s investigation confirms these allegations, the EU could impose retroactive tariffs against battery-powered cars imported from China, a move that was not seen with too much enthusiasm by the Chinese government or some local German automakers last year.

The increasing dominance of China’s EV makers has also urged some American officials to speak out in favor of tariff spikes. Earlier this year, U.S. Senator Josh Hawley proposed legislation to hike the Chinese vehicle import total tariff to 125% from 27.5% currently. The bill also seeks to apply a 100% tariff increase to vehicles assembled in Mexico by Chinese-based automakers.