How China grabbed the driving seat of the global EV race

In 2021, when German executives first laid eyes on the Zeekr 001, a sleek long-range electric vehicle built in Hangzhou, they were unsettled. The car had the polish of a European premium model, but its technology was Chinese.

For brands that had dominated the global auto industry for decades, it was a signal that the balance of power was shifting. If companies like Audi wanted to compete, they would need Chinese technology.

Three years on, that early warning looks prophetic. China is no longer a fast follower in the global car race. It is the world's electric vehicle (EV) giant, reshaping both markets and design cultures. 

The transformation has been so dramatic that industry analysts now talk about "China Inside," a reference to the Intel Inside campaign of the 1990s. Then, the label signalled quality computing. Today, it means that the beating heart of many EVs – batteries, platforms, or entire software systems – originates in China.

How China did it

China's success is the product of strategy, speed and scale. Beijing set the stage in the late 2000s, designating new energy vehicles as a strategic industry. Subsidies, tax breaks and public procurement contracts created fertile ground. State planners invested billions in charging infrastructure, while city governments offered rebates that made EVs attractive to middle-class buyers.

But subsidies alone did not build the industry. The other half of the story is competition. Hundreds of companies rushed into the market, from nimble start-ups to state-backed giants. Many folded, but those that survived, such as BYD, Nio, Xpeng and Geely, did so by innovating at pace.

BYD, now the world's top EV seller, can move from concept to factory production in just 18 months – half the time of most Western rivals.

Control of the supply chain has been another critical factor. China dominates the refining of lithium, cobalt and nickel, the key ingredients of modern batteries. More than 60 per cent of the world's lithium carbonate is processed there, and its battery firms, led by CATL, have achieved the scale to drive down costs. The result is visible in showrooms. Two-thirds of fully electric cars sold in China are now cheaper than petrol equivalents.

Just as important has been consumer appetite. A new generation of Chinese drivers does not view domestic brands as inferior. They want cars packed with features – voice controls, reclining massage seats, karaoke systems – and are finding them in homegrown EVs that often cost a fraction of Tesla or BMW models.

Possibilities and expansions

With its home market now saturated, China's EV industry is looking outward. In 2023, it overtook Japan as the world's largest car exporter. Its EV exports surged to nearly $35 billion, with Europe becoming a key destination. Compact BYD models and SAIC's budget-friendly EVs are increasingly common on European streets, while partnerships with firms such as Renault and Stellantis allow Chinese technology to reach markets indirectly.

The appeal is that the Chinese EV platforms are modular and affordable. They allow legacy automakers to skip years of development and bring competitive models to market. For smaller players, this is a lifeline. For Chinese firms, it is a new revenue stream, especially as domestic competition drives down margins.

The technology edge also keeps widening. CATL has demonstrated batteries capable of adding hundreds of miles of range in minutes. Automakers are testing autonomous driving systems in crowded Chinese megacities, gathering data in environments more complex than those faced by Western counterparts. If these advances continue, Chinese EVs could set global benchmarks not just for price, but also for performance and design.

Challenges ahead

Yet the story is not one of unbroken triumph. Overcapacity is already a problem in China. Dozens of firms are producing far more cars than they can sell at home. This fuels export pushes that trigger accusations of dumping from Western rivals. 

The European Union has launched probes into Chinese subsidies, while the United States and Canada have imposed tariffs as high as 100 per cent. North America, once the world's most lucrative market, remains off limits for now.

Raw materials are another pressure point. While China leads in refining, it imports much of its lithium and cobalt. Volatile prices can quickly squeeze margins. Efforts are underway to diversify, with state firms buying stakes in mines from Chile to the Democratic Republic of Congo and new research into sodium-ion and cobalt-free batteries. But vulnerabilities remain.

Geopolitics looms as the greatest uncertainty. To some in Washington and Brussels, China's EV surge is not simply about cars but about influence. A fleet of Chinese-made vehicles brimming with sensors and data links raises national security questions. Trade tensions could escalate, reshaping supply chains in ways that blunt China's reach.

For now, China is undeniably ahead. Its EVs are cheaper, its batteries are faster, and its industry moves at a speed that unsettles its competitors. The challenge will be to sustain that lead without collapsing under the weight of overcapacity, trade barriers or political suspicion.