The Rise of Chinese Leadership in the Plug-in Electric Vehicle Industry

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## The Rise of Chinese Leadership in the<br>Plug-in Electric Vehicle Industry

<br>

### John Paul Helveston

### The George Washington University

### June 14, 2024

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# China's PEV Ambition

<br>

## - Energy Security
## - Pollution Reduction
## - Technology Leadership

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# China's PEV Ambition

<br>

### - .green[Energy Security]
### - Pollution Reduction
### - Technology Leadership

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# China's PEV Ambition

<br>

### - Energy Security
### - .green[Pollution Reduction]
### - Technology Leadership

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# China's PEV Ambition

<br>

### - Energy Security
### - Pollution Reduction
### - .green[Technology Leadership]

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# More than half of global PEV sales are in China

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# Institutions

# Market Conditions

# Policies

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# .orange[Institutions]

# Market Conditions

# Policies

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<br>

## 1) The Joint Venture System

## 2) Local Protectionism

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# The Chinese Joint Venture System

## 1980s: 以市场换技术 = “Exchange market for technology”

???

Past research suggests system has largely failed to transfer technology

(Brandt & Thun, 2010; Feng, 2010; Howell, 2016; Huang, 2003; Lazonick & Li, 2012; Nam, 2011)

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### “这就像吸食鸦片一样，一旦你沾染上了就永远也无法戒掉。”

何光远, 中国前机械工业部部长

<br>

### “It's like opium. Once you've had it you will be addicted forever.”

Guangyuan He, Former Minister of Machinery and Industry (Reuters, 2012)

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## JV system creates disincentives for<br>industry incumbents to innovate

<br>

### Multinational OEMs lack incentives to bring cutting-edge technologies

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### Chinese JV partners lack incentives to independently innovate

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### While MNEs dominate global vehicle markets,<br>Chinese firms sell most PEVs in China

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### While MNEs dominate global vehicle markets,<br>Chinese firms sell most PEVs in China

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## JV requirement dropped for PEVs in 2018 -> Tesla entry

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# Local protectionism incubated early<br>(and continuing) experimentation

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# Institutions

# .orange[Market Conditions]

# Policies

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<br>

## 1) Lower bar for selling PEVs

## 2) Infrastructure

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## Chinese buyers are more willing to adopt BEVs

]

.left[.font80[Helveston et al. (2015) "Will subsidies drive electric vehicle adoption? Measuring consumer preferences in the U.S. and China" _Transportation Research Part A: Policy and Practice_. 73, 96–112. DOI: [10.1016/j.tra.2015.01.002](https://www.sciencedirect.com/science/article/abs/pii/S0965856415000038)]]

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### Chinese buyers are willing to accept relatively lower BEV driving ranges

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# .center[Infrastructure]
 
<br>

### .center[World's largest charging network]

- China has >1M EV chargers, ~40% fast chargers.
- **112,000 chargers installed in December 2020 alone**.

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### .center[World's largest HSR network]

- China's high-speed rail network greater than length of the equator (40,000 km).

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# Institutions

# Market Conditions

# .orange[Policies]

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## Bigger Sticks & Carrots

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## .center[Consumers]

- **Purchase Subsidies**:
    - RMB 50,000 (USD $8,200) for PHEVs
    - RMB 60,000 (USD $9,800) for BEVs
- **PEV exemptions from restrictions**
    - Shanghai license plates auction for ~$15,000 (free for PEVs)
    - Unlimited driving during "Rush Hour" (7am – 8pm)

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## .center[OEMs]

- **Dual Credit System**: require annual credits for meeting fuel economy standards & selling PEVs.
- Tesla earned $1.58 billion from credit sales in 2020<br>(.green[$721 million] profit would have been .red[-$859 million] loss).

]

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# Policies that make ICEVs more expensive<br>than PEVs increase PEV adoption

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# .center[China's PEV Industry now<br>central target in US-China Trade War]

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### May 14, 2024: Biden admin releases 100% tariff on Chinese-made EVs

<br>

### Summary of [Justification from the Whitehouse](https://www.whitehouse.gov/briefing-room/statements-releases/2024/05/14/fact-sheet-president-biden-takes-action-to-protect-american-workers-and-businesses-from-chinas-unfair-trade-practices/):

- China uses "unfair trade practices" to achieve artificially low prices. 
- China has "overcapacity" in EV production due to "non-market practices".
- China's global exports of EVs grew by 70% from 2022 to 2023.
- Therefore, high tariffs are needed to protect US auto.

> "We can’t let China’s EV overcapacity problem turn into a U.S. auto industry problem"<br>- Joe Biden, May 14, 2024

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### China's real overcapacity problem:<br>**ICE cars**

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### Recent surge driven by ICE exports to Russia

<br>[Source](https://x.com/gdp1985/status/1795562850678710700)

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## China EV exports driven by Tesla & BYD

Source: https://www.csis.org/analysis/electric-shock-interpreting-chinas-electric-vehicle-export-boom

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## .center[Slides available at [https://slides.jhelvy.com/](https://slides.jhelvy.com/)]

@johnhelveston <svg aria-hidden="true" role="img" viewBox="0 0 512 512" style="height:1em;width:1em;vertical-align:-0.125em;margin-left:auto;margin-right:auto;font-size:inherit;fill:white;overflow:visible;position:relative;"><path d="M459.37 151.716c.325 4.548.325 9.097.325 13.645 0 138.72-105.583 298.558-298.558 298.558-59.452 0-114.68-17.219-161.137-47.106 8.447.974 16.568 1.299 25.34 1.299 49.055 0 94.213-16.568 130.274-44.832-46.132-.975-84.792-31.188-98.112-72.772 6.498.974 12.995 1.624 19.818 1.624 9.421 0 18.843-1.3 27.614-3.573-48.081-9.747-84.143-51.98-84.143-102.985v-1.299c13.969 7.797 30.214 12.67 47.431 13.319-28.264-18.843-46.781-51.005-46.781-87.391 0-19.492 5.197-37.36 14.294-52.954 51.655 63.675 129.3 105.258 216.365 109.807-1.624-7.797-2.599-15.918-2.599-24.04 0-57.828 46.782-104.934 104.934-104.934 30.213 0 57.502 12.67 76.67 33.137 23.715-4.548 46.456-13.32 66.599-25.34-7.798 24.366-24.366 44.833-46.132 57.827 21.117-2.273 41.584-8.122 60.426-16.243-14.292 20.791-32.161 39.308-52.628 54.253z"/></svg><br>
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# Extra slides

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## Chinese automakers offer a greater variety of PEVs<br>at more affordable prices and driving ranges

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