EVs are poised to make China the world’s biggest car exporter

Combustion engines in motor vehicles account for about 15% of carbon-dioxide emissions each year. Eliminating them requires the electrification of transport, which in turn requires batteries in unprecedented quantities. In 2024 the outlines of a new global battery-production infrastructure will come into focus in China, Europe and America—a network of factories capable of churning out batteries in sufficient amounts to store the energy required to propel the global fleet of vehicles.

The majority of battery factories, existing and planned, are in China. Many in Europe are being built by Chinese firms. Benchmark Mineral Intelligence, a firm of analysts, says that China will have 69% of global battery-production capacity by 2030, down from 78% in 2022, but still sufficient to make enough batteries for 90m cars every year. Europe and America, in contrast, are each forecast to have around 14% of global capacity by 2030, enough for 19m vehicles each.

China holds this lead in part because its government has been supporting electric-vehicle (ev) manufacturing and adoption for longer. Tax breaks for EV purchases began in the early 2010s, and by 2022 the Chinese government had poured around $30bn into supporting the market through consumer incentives alone; EV manufacturers received further support through local governments. These subsidies created competition between many new ev companies. Most have now gone bust, leaving winners such as BYD and CATL in a strong position. China’s pre-existing strengths in the electronics supply chain also gave EV manufacturers a boost. By 2010 there were already more than 100m electric bikes in China, thanks to government bans of petrol-powered motorcycles in city centres.

Europe and America have only recently started to catch up. In America the Inflation Reduction Act (IRA), passed in 2022, provides tax breaks for ev buyers, but only if the car contains no parts from China or Russia. The IRA also offers battery-makers a tax credit which covers about one-third of the cost of production. All told, Benchmark calculates that American automakers will receive $140bn in subsidies over the next decade. In early 2023 the European Union proposed a similar measure, the Green Deal Industrial Plan, which opened the way for member-states to offer subsidies of their own, as well as providing some funding.

Thanks to these stimulus efforts, it now looks as though both Europe and America will have sufficient battery-production capacity to cover domestic demand for EVs by 2030. China is set to have three times more battery capacity than it needs to service its home market. As 2024 begins, China is poised to become the world’s largest car exporter for the first time. And no matter how much money Europe and America spend trying to catch up, China’s battery dominance will last for the foreseeable future. ■

Hal Hodson, Special projects writer, The Economist