China Is Doubling Down on Electric Vehicle Subsidies
When it comes to spending government money in the private sphere, China is second to none. Now, the country is doubling down on subsidies for the production of electric vehicles (E.V.s). The U.S. should make sure not to follow suit.
As Yoko Kubota and Clarence Leong wrote in The Wall Street Journal this week, China is “encouraging unprofitable carmakers to keep producing as officials try to boost economic growth, preserve jobs and expand China’s role in the global electric-vehicle business.” The authors detail Zhido, a shuttered Chinese E.V. manufacturer that has reentered the market. “State-backed funds and dozens of other investors pumped fresh capital into the company late last year—despite widespread signs that China has too many carmakers to serve its needs.”
In fact, “China spent roughly $173 billion in subsidies to support the new energy-vehicle sector, which encompasses electric and plug-in hybrid vehicles, between 2009 and 2022,” write Kubota and Leong. By 2019, there were 500 E.V. manufacturers in China. But that same year, the government started paring back those incentives, and by 2023, the number of automakers had shrunk by 80 percent.
Now, though, the country is ready to throw good money after bad: “Chinese leader Xi Jinping has called on local leaders to promote ‘new productive forces’—a buzzword in Chinese policy circles for the need to promote high-value manufacturing industries.” Local leaders responded by pumping money into struggling companies—in one case, giving the equivalent of $27.5 million to a company that had sold fewer than 2,000 cars in the first quarter of 2024.
“China currently has the capacity to produce some 40 million vehicles a year, though it sells only around 22 million cars domestically,” the Journal authors warn. As a result, the country’s largesse “is adding cars to a global market that risks becoming more oversupplied.”
Of course, E.V.s are not inherently a bad
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