China: From Subsidies to Ecosystem

How China Is Cementing Its Leadership in the New Energy Vehicle Market

Before making its mark on the global stage, China's New Energy Vehicles (NEV) industry traveled a considerable distance, beginning in the 1990s.

Let's briefly outline the key stages in this industry's development. From 1991 to 2005, research and development work proceeded actively with state support. The year 2005 served as a catalyst for further development, when China officially recognized NEV alongside hydrogen energy as advanced technologies. Starting in the second half of the 2000s, the Chinese state moved toward industrial production. Thanks to government policy, largely tied to subsidizing the new industry, by 2015 China had already surpassed other countries in NEV production and sales.

By 2020, Chinese leadership had developed a clear understanding that for further development, the industry needed to rely not on subsidies and grants, but on sustainable market demand that would allow "weeding out" inefficient enterprises and increasing competition in the new-type automotive industry. This situation is hardly unique—the "green" energy sector was simultaneously traveling the same path. The results weren't long in coming: after 20 years, China is rightfully considered a leader in low-carbon energy.

The 14th Five-Year Plan period (2021–2025) became pivotal for achieving set goals in developing the new energy vehicle industry. In 2021, it transitioned—to use Chinese terminology—from "accumulation" (积累) to "penetration" (参透). This is determined primarily by explosive sales growth of new-type vehicles in China's domestic market (Fig. 1). Second, the penetration rate (i.e., the share of the domestic market accounted for by NEVs) similarly demonstrated a leap—from 13.5% in 2021 to nearly 55% as of the end of 2025.