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.

Notably, car buyers are choosing Chinese domestic solutions—Chinese brands comprised 63% of all NEVs in 2025. The undisputed leader in domestic sales remains China's BYD.

Growth Challenges: Infrastructure, Technology, and Industry Economics

Despite fairly impressive growth, a number of structural problems remain that couldn't be resolved during the past five-year period. First, there's uneven distribution of vehicles across China's territory—more than half (61%) of all registered vehicles are concentrated in eastern and southern Chinese provinces. Second, there's an insufficient number of charging stations—as of 2022, the ratio of NEVs to charging stations stood at 3 to 1. Third, there are technological and economic problems. The technological constraint is autonomous driving range, which seriously lags behind ideal conditions (only 450 km instead of the claimed 600 km). Moreover, lithium-ion batteries, the main NEV component, are prone to fires. Any quality defect can lead to a short circuit and, consequently, fire. Economic constraints include the high cost of these batteries, which sometimes reach half the cost of the entire vehicle. Fourth, there's the persistently high cost of new energy vehicles compared to traditional internal combustion engine cars, as well as high insurance costs for such vehicles (on average, NEV insurance runs about 4,000 yuan, while traditional car insurance costs about 2,200 yuan). Finally, the reduction in government subsidies and releasing the industry into "free float" have led to increased competition. Over the past 10 years, Chinese automotive industry profitability has consistently declined—from 8.7% in 2015 to 4.1% in 2025. It's difficult to say precisely how far the "price wars" can go, and which companies will emerge victorious.

China's export strategy for new energy vehicles deserves special attention. During the 14th Five-Year Plan period, exports grew from 0.25 million vehicles in 2021 to more than 3 million in 2025. The Chinese state is transitioning from simple product export (产品出海) to "ecosystem export" (生态出海). In other words, China's task is to build a business ecosystem abroad that implies not only selling finished vehicles, but also manufacturing with after-sales service provision. Note that scaling up Chinese exports is fraught with a number of difficulties. This is primarily related to developed and wealthy markets such as the EU and US, which seek to prevent Chinese penetration through a range of restrictive measures. These include establishing new technical rules and standards, raising import tariffs, and (indirectly) creating the Carbon Border Adjustment Mechanism (CBAM). In this context, reorienting supplies to "Global South" markets may not deliver the economic effect that Chinese automotive corporations are counting on.

Ecosystem Export and Russia's Place in China's NEV Strategy

Speaking of prospects for further development, the 15th Five-Year Plan period (2026–2030) could prove pivotal. The industry must finally transition from state support to being fully driven by market forces and become technologically independent.

Let's examine the main target benchmarks for 2030:

1. exports should reach 10 million vehicles annually, with overseas production totaling 2.13 million units;
2. Chinese brands' domestic market penetration should exceed 80%;
3. commercial deployment of solid-state batteries is expected, enabling increased range and significantly lower overall vehicle costs.

Further decarbonization and the gradual transition of transport to fuel from clean energy sources, pursued under Chinese state policy, are part of an irreversible process toward developing green energy in China. According to research by Chinese scientists from the Energy Economics Institute of CNOOC (China National Offshore Oil Corporation), gasoline consumption in China peaked in 2023 at approximately 163 million tons per year. Diesel consumption has remained stable for many years at 180–200 million tons annually, but the accelerated replacement of traditional heavy trucks with new energy models will bring consumption of this fuel down to 160 million tons per year by 2030. Longer-term forecasts indicate that oil's share as a vehicle fuel source will decline from 87% in 2025 to around 20% by 2060.

Russia is actively cooperating with China in the NEV sector. One example of this partnership is the automotive plant in Tula Region owned by China's Great Wall Motor. Following the events of 2022, Chinese automakers captured nearly half the market by sales volume. In 2024, almost every second car (43%) was Chinese. Unlike China, the situation with charging infrastructure in Russia is reversed. Charging stations exist, but they operate at only 5–6% capacity. Nevertheless, Russia has yet to create an independent NEV ecosystem. Our country remains a sales market and local assembly platform for China, which serves as the primary supplier of electric vehicles, technologies, and components.

Thus, China's NEV industry has transformed from a state-supported experimental sector into one of the pillars of the green energy transition and industrial modernization. Further development of the industry will largely depend on technological independence and sustainable market demand.