China and Cars: A Love Story

In 1990, China's private car ownership was so negligible as to be statistically irrelevant. Roads built for bicycles and state-owned buses carried a population that had never been encouraged — and in many cases had never been permitted — to own a vehicle. So complete was the transformation in the thirty years that followed that it is easy to forget how recently it happened: China is now not only the world's largest car market but, as of 2023, the world's largest car exporter, having overtaken Japan for the first time.

The rapidity of this ascent demands explanation. Three factors converge. The first is policy: never before in the modern era had a government intervened so deliberately and so comprehensively in the development of an automotive industry. State subsidisation of both manufacturers and consumers has been systematic and sustained, enabling a proliferation of brands that would not have survived on market logic alone. The second factor is infrastructure: China has constructed more EV charging points than the rest of the world combined, removing the range anxiety that has slowed adoption elsewhere. The third — and perhaps least analysed — is aspiration.

For the generation of Chinese citizens who grew up in the reform era, car ownership carried a symbolic weight that Western buyers, long accustomed to the automobile, rarely feel. Such is the intensity of this aspiration that brand loyalty, in the Western sense, is correspondingly weaker — consumers are willing to switch, to experiment, to adopt a new entrant that offers more technology for less money. This psychological openness has proved enormously beneficial to domestic manufacturers.

The implications for Western incumbents are severe. Not only have Chinese brands established dominance at home, but they are now exporting aggressively to Europe, South America, and South-East Asia. BYD, virtually unknown outside China a decade ago, now sells more electric vehicles globally than Tesla. The disruption of legacy manufacturers — Volkswagen, Stellantis, Ford — is no longer theoretical. Seldom has the established order of a global industry been overturned so quickly and so comprehensively.

Governments in the West have responded, predictably, with tariffs. The EU's imposition of duties of up to 45% on Chinese EVs reflects a genuine anxiety about the pace of competitive displacement. The counter-argument — that cheap electric vehicles would accelerate decarbonisation and reduce consumer costs — has received less political traction than the jobs argument. Whether tariffs can meaningfully slow the Chinese advance, or merely delay it, remains to be seen.

What is not in doubt is that the electrification of transport, globally, will be shaped in large measure by decisions made in Beijing, Shenzhen, and Shanghai. The road to dominance, it turns out, runs through China.