For China’s auto market, electric isn’t the future. It’s the present

Zhang Youping, a Chinese retiree, purchased an all-electric, small SUV from BYD — China’s largest electric vehicle maker — at an auto show for around $20,000 last month. Her family has bought three gas-powered cars in the last decade, but she recently grew concerned about gas prices and decided to go electric “to save money.” A few months earlier, her son had also bought an EV. It was a $10,000 hatchback from Leapmotor, another Chinese manufacturer.

This year, one-quarter of all new cars purchased in China will be an all-electric vehicle or a plug-in hybrid. There are, by some estimates, more than 300 Chinese companies making EVs, ranging from discount offerings below $5,000 to high-end models that rival Tesla and German automakers. There are roughly 4 million charging units in the country, double the number from a year ago, with more coming.

While other EV markets are still heavily dependent on subsidies and financial incentives, China has entered a new phase: Consumers are weighing the merits of electric vehicles against gas-powered cars based on features and price without much consideration of state support. By comparison, the United States is far behind. This year, the country passed a key threshold of EVs accounting for 5% of new car sales. China passed that level in 2018.

Even new U.S. incentives have raised questions about how effective they will be in addressing mitigating factors for electric cars, such as long wait lists, limited supplies and high prices. The U.S. Inflation Reduction Act passed last month included a $7,500 tax credit for electric vehicles with conditions on where the cars are manufactured and where batteries are sourced. Automakers complained that the credit did not apply to many current EV models, and that the sourcing requirements could increase the cost of building an EV.

It took China more than a decade of subsidies, long-term investments and infrastructure spending to lay the foundation for its electric vehicle market to start standing on its own. Tu Le, a managing director of Beijing-based consultancy Sino Auto Insights, said competition and dynamism are now driving the Chinese market, not government subsidies. “We have reached a point in China where we’re competing on price. We’re competing on features. So it’s not a subsidy thing,” Le said. “The market is taking over.”

China’s top leader, Xi Jinping, declared in 2014 that development of electric vehicles was the only way that his country could transform “from a big automobile country to an automobile power.” Underscoring its ambitions, China set an aggressive goal: 20% of new car sales would be electric vehicles by 2025. China will most likely fly by that target this year, three years ahead of schedule. Already the biggest EV market, China also has one of the fastest growing, with sales expected to double this year to about 6 million vehicles — more than the rest of the world combined.

Of the world’s top-10 bestselling EV brands, half are Chinese, led by BYD, which lags only Tesla in global market share and is starting to ship its electric cars abroad. And it’s not just the car sales that are thriving in China. Chinese battery manufacturers CATL and BYD are the biggest players in the industry, while Beijing holds a tight grip on access to critical raw materials.

The strong demand for electric cars is a bright spot in an otherwise sluggish Chinese economy, which is coping with a property market in crisis and crippling COVID-19 policies. As part of its economic stimulus plan, China said it would continue to plow money into electric cars. Beijing said last month that it was extending a tax waiver for new energy vehicles until 2023 at a cost of $14 billion instead of letting it expire this year as scheduled.

Gou Chaobo, a 27-year-old employee at a construction firm who recently decided to trade in his gas-powered sedan for an EV, said financial incentives did not weigh on his decision to go electric. In Chengdu, the megacity in southwestern China where Gou lives and works, traditional cars are restricted from being on the road certain days of the week to help reduce congestion and pollution. Electric vehicles, however, are free to come and go. For electric cars, parking is free for the first two hours at public parking lots.

Gou said the cost of operating an electric vehicle, by his calculation, is less than one-tenth that of a gas-powered car. Once he settles on a specific automobile, he will also benefit from a government subsidy that can knock nearly $2,000 off the sticker price, depending on the EV. Also, the government will waive a 10% car purchase tax on “new energy” vehicles — a catchall phrase used in China that also includes plug-in hybrid cars.

Gou, who was checking out a midsize sedan from the Chinese brand XPeng at the Chengdu auto show, said he decided to go electric “because new energy is where the future is headed.” In other markets, electric vehicles from traditional automakers are often considered luxury vehicles, whereas Chinese brands are also competing with inexpensive models like the Wuling Hongguang Mini — a $4,500 four-seat hatchback that was China’s bestselling EV in 2021. It is made by a joint venture of General Motors and the Chinese automakers SAIC and Wuling.

The country’s seriousness about developing electric vehicles was on display when it rolled out the red carpet for Tesla to build a massive factory in Shanghai in 2018. The move was seen as a way to force the domestic market to compete directly with an industry leader. Beijing allowed Tesla to become the first foreign automaker allowed to manufacture in China without a local partner and the Shanghai government helped foot some of the factory-building costs.

After some early stumbles and COVID lockdowns that hobbled its China operations, Tesla now produces more vehicles at its Shanghai factory than anywhere else. But a slew of Chinese competitors who are catering to local tastes are also churning out new models at a rapid cadence. Roughly 80% of all electric vehicles sold in China this year were made by domestic automakers. Most foreign brands have largely struggled to make inroads and keep pace with their Chinese competitors.

The domestic competition is cutthroat, with new entrants emerging constantly, leaving most of the Chinese companies swimming in losses and many almost certain to fail from the challenges of manufacturing electric vehicles at the scale needed to drive down costs. But moving from selling cars at home to selling them abroad comes with complications, such as disputes over warranties. Yet as sales of gas-powered cars slump, Chinese automakers increasingly have little choice but to go all in on electric.

Last month, Geely Automobile Holdings, one of China’s most prominent automakers, with investments in Volvo Cars and Mercedes-Benz, said it aimed to sell as many electric and hybrid vehicles next year as traditional internal combustion engine models. Jason Low, a Shanghai-based principal analyst for the research firm Canalys, said Chinese EV brands have been more aggressive than foreign automakers in integrating new technologies into the vehicles, such as entertainment features and voice-activated controls.

Zhang, the retiree who bought an electric SUV, said she chose BYD because she preferred a bigger brand. She added that she was cautious about what brand to buy because the air conditioning on her son’s less expensive EV hatchback broke after a few months. She also considered some foreign electric vehicles, but the minimal features did not suit her tastes. “There was thoroughly nothing inside. I don’t really like that design,” Zhang said. “It’s a bit different from our Chinese living habits.”

This article originally appeared in The New York Times.