The China electric vehicle boom promises much

China’s production of electric vehicles is booming, accounting for nearly 70% of global EV sales in 2023 with 9.5 million vehicles produced. If the success of Japan’s auto industry in the last century is any guide, the rise of China’s EV sector promises to lift productivity and sustain the growth momentum of manufacturing for years.

What you will learn:

• We estimate the overall value added of China’s automobile industry was up to 2.3% of GDP in 2020. And if the momentum continues as we expect, the contribution could rise to 3.2% by 2030.
• The surge in EV production and capacity in China has prompted concerns about overcapacity in the industry. However, comparing sales, production, and capacity trends in China’s EV sector, we think the signs of overcapacity are not as prevalent as many perceive. We acknowledge the risk that promising EV demand may prompt more capacity building in China in the future.
• Trade conflict and geopolitical uncertainty are the biggest risks to China’s EV industry. Developed economies such as the US and EU in particular have increased their scrutiny of imports of Chinese EVs in recent years. Focusing on domestic demand, consistently investing in R&D, and diversifying their external reach to Asia could help Chinese EV makers mitigate these external risks.