China’s rapidly growing electric vehicle (EV) industry has reshaped the economic, political, and competitive aspects of its international relations, particularly with the European Union (EU) and the United States (US). The EV sector has become at the center of both trade wars and strategic collaborations, boosting China’s global influence. Through its manufacturing capacity, technology development, and strategic policies, China has gained influence in this field both regionally and globally. Behind China’s leadership position are strategic planning, strong industrial policies, and market conditions.
Global trends in renewable energy and clean technology have propelled China to a leading position in the EV sector, while these developments are reshaping the country’s economic, environmental, and geopolitical strategies. Dominating the most critical components of the EV ecosystem, including electric vehicle batteries, charging infrastructure, and innovative manufacturing methods, China is the market leader, accounting for more than 50% of global EV sales.[i] With this dominance, it can be said that China has strengthened its strategic power in international trade.
China’s success in EV technologies has enhanced economic cooperation between countries. Through agreements with the EU, China has become a key player in setting new standards in battery technologies. Partnerships with South Korea and Japan have introduced the concept of “coopetition” (competition and cooperation) in battery production. These economic ties can be seen as factors that provide alternative solutions to China’s energy dependence while expanding commercial corridors.
China’s EV industry, with its potential to reduce carbon emissions, and the policies it follows in this regard, support environmental sustainability goals.[ii] These policies have strengthened China’s global commitments to reducing carbon emissions within the framework of the Paris Climate Agreement. EV exports and technological support have become diplomatic tools that emphasize China’s environmental leadership. Additionally, technology transfer agreements with developing countries also support China’s soft power strategy.[iii]
In addition to these steps, efforts focused on battery recycling aim to strengthen environmental sustainability. Technological investments in battery recycling and charging infrastructure have enabled China to increase its influence in the Asian, African, and European markets in alignment with its Belt and Road Initiative. These investments support infrastructure and energy transfers, thereby strengthening diplomatic ties. Furthermore, critical minerals used in EV production and the battery supply chain have become a key part of China’s international cooperation strategy. In terms of lithium-ion battery technology and its raw materials, China has similarly strengthened its commercial relations with South American and African countries. Agreements on cobalt mining with countries such as the Democratic Republic of the Congo have increased China’s control over this critical sector.[iv]
China’s EV manufacturers (such as BYD, Nio, Geely, etc.) have expanded into international markets. In this regard, China is targeting not only other countries but also developed markets such as the EU and the US in EV exports. In Europe, BYD’s sales have increased, while Nio’s innovative battery swapping stations are bringing a new dynamism to the sector. These exports, while strengthening economic ties, also naturally bring about increased commercial competition. The EU’s investigation into subsidies for China highlights the impact of the EV sector on economic competition. China’s strong subsidy policies provide advantages to local manufacturers, raising concerns in other countries.
. It can be said that the biggest concern in recent times is the pressure of competition. Traditional European automotive giants, such as Volkswagen and Renault, are facing significant competitive pressure due to China’s cost-effective EVs. While Volkswagen attempts to maintain its presence in the Chinese market through local partnerships and production facilities, China often uses these collaborations to contribute to its own technological advancements. Recent news reflecting Volkswagen’s struggles suggests that China’s rapidly growing market share may have a direct or indirect impact on this situation.[v] Despite being under significant competitive pressure in the Chinese market, Volkswagen appears to be pursuing a long-term strategy by maintaining its partnership with the Chinese automotive company SAIC Motor. Volkswagen’s recent extension of its agreement with SAIC until 2040 reflects China’s leadership in the sector and, despite the current trend, shows Volkswagen’s effort to increase production capacity, gain cost advantages, and secure a stronger position in the electric vehicle market.[vi]
China’s success in the EV sector is also increasing competition with the United States. Chinese manufacturers, such as BYD, are challenging Tesla’s global leadership with cost-effective models. As of 2023, it has been announced that BYD and other Chinese companies have surpassed Tesla’s sales.[vii] Tesla’s Gigafactory in Shanghai helps the company maintain a strong presence in the Chinese market. The potential re-election of Donald Trump has also become a development that could influence these dynamics.[viii] Trump’s tough policies against China and the new tariffs he has proposed could potentially create disadvantages for China. However, policies supported by Elon Musk, who has good relations with Trump, could provide advantages for Tesla. Nevertheless, a potential trade war between the US and China, along with geopolitical risks, could pose a significant threat to Tesla’s growth strategies, especially when compared to BYD, which has already established a strong presence in the domestic market.
China’s leadership in the EV industry has largely been achieved through a combination of state-supported policies, technological investments, and a large domestic market. This leadership is not only shifting global economic balances but also providing China with geopolitical superiority. Competition with Tesla will be a key factor in shaping China’s long-term success in the global market. How China achieves its sustainability goals and how it manages to compete with innovative companies like Tesla will be decisive for the future of the EV industry.
China’s electric vehicle industry is not only a tool for economic growth but also a key part of its international strategies. Leadership in the EV sector has not only increased China’s global influence but also enabled the creation of new trade routes, diplomatic alliances, and sustainable development models. Along with technological innovations, China’s diplomatic power will continue to grow in line with its sustainable development goals. The sustainability of this impact will depend on the balance of competition and cooperation with other countries in the coming years.
Simay GÜZEL
[i] Yukun, L., “Nation poised to hold more than half of Global EV fleet by 2025”, China Daily, https://www.chinadaily.com.cn/a/202411/29/WS6749120ea310f1265a1d02dd.html, (Date Accession: 03.12.2024).
[ii] Hu, Y., Wang, Z., & Li, X., “Impact of policies on Electric Vehicle Diffusion: An Evolutionary Game of Small World Network Analysis”, Journal of Cleaner Production, https://www.sciencedirect.com/science/article/abs/pii/S0959652620317509, (Date Accession: 03.12.2024).
[iii] Raslan, R. A. A., “Climbing up the ladder: Technology transfer-related policies in the context of the belt and road initiative”, Utrecht Law Review, https://utrechtlawreview.org/articles/10.36633/ulr.922, (Date Accession: 03.12.2024).
[iv] DeCoff, S., “Major copper discoveries”, S&P Global Homepage, https://www.spglobal.com/marketintelligence/en/news-insights/blog/major-copper-discoveries, (Date Accession: 03.12.2024).
[v] Valerio, P., “Ev makers struggle with slow demand and battery shortages”, EPS News, https://epsnews.com/2024/11/26/chinas-ev-prowess-disrupts-u-s-eu-car-makers/, (Date Accession: 03.12.2024).
[vi] Fusheng, L., “VW and SAIC joint venture renewed”, China Daily, https://www.chinadaily.com.cn/a/202412/02/WS674d1f09a310f1265a1d0831.html, (Date Accession: 03.12.2024).
[vii] Carson, E., “Tesla stock near highs as FSD V13 launches; BYD sales hit new high”, Investor’s Business Daily, https://www.investors.com/news/tesla-vs-byd-ev-sales-robotaxis/, (Date Accession: 03.12.2024).
[viii] Ibid.