Why Does China Have So Many More EV Options?

Big Head Start

These days, the battle between China and the U.S. in terms of EV production and adoption is a hot topic. China has invested heavily in EVs, sinking $60 billion into the industry as it aggressively tries to achieve a goal of transitioning to hybrid and all-electric vehicles only by 2035. As a result, China sold a million more EVs in 2020 than the U.S. and has a big head start on transitioning to electric power in the coming years, with far more options available to buyers to boot.

Photo: Xpeng

Economies of Scale

China is the largest automotive market in the world, for starters. It has also passed considerable legislation that supports the sale of electric vehicles, which makes them a compelling option for those in the market for a new vehicle of any kind. Despite this, China lags just a bit behind Europe in terms of EV and plug-in hybrid sales, moving 1.33 million of them in 2020 versus 1.39 million in Europe, though the U.S. fell far behind with 328,000 sold.

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Lead, not Follow

Experts say China is on track to dominate the market by 2025, however, and will account for half of total global sales at that point. This hasn't happened overnight, of course. China decided over a decade ago that it wanted to lead the world in EVs, a stark contrast to the follower mentality the country has traditionally exhibited in the automotive world.

Photo: SAIC

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Big Investments

China is also the world's largest emitter of greenhouse gases, with its largest cities plagued with smog. Thus, it has turned to EVs as a solution to reach carbon neutrality by 2060, and has invested heavily in upstart automakers as a result. That includes a $1 billion investment in NIO, a huge infusion of cash in an industry that's difficult to break into.

Photo: SAIC

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Regulations and Incentives

If nothing else, China has proven that government can influence EV adoption in a big way, as its massive incentives for automakers and consumers have had a big impact on production and sales, as have other restrictions. In some cities, access is limited to EVs, at least during certain times, and buying a license plate for an ICE-powered vehicle can cost as much as $12,000 in some cases. That fee is waived for electric vehicles.

Photo: BYD

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Tied to Subsidies

Additionally, China has imposed a manufacturing quota for automakers, which must produce a certain number of EVs every year or risk facing fines. Thus far, sales have been closely tied to subsidies, however, and a recent pullback in incentives caused sales to plummet temporarily. It's clear that organic demand is far lower than the government-created market has generated.

Photo: NIO

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Catching Up

The key to sustainable growth in the EV market is to create compelling EVs that are superior options to ICE vehicles, and Tesla is one automaker that has managed to do that, both in China and the U.S. But for now, the Chinese government has essentially forced the issue, which is why buyers there have so many more options to choose from. America likely won't be as aggressive in that regard, but you can bet that more incentives are on the way in the coming months and years.

Photo: NIO

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