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China now has the world’s largest automotive industry. One major reason is that no other country can produce electric vehicles as cheaply. For example, the same crossover EV worth $50k in Europe is available in China for an MSRP of just $16k. How does China build the world’s most cost-effective EVs? By building the world’s most cost-effective EV battery packs. And that took years of hard work.

How does China do it? First and foremost, the Chinese government is serious about EVs. It’s given out $29 billion in subsidies, research funding, and tax breaks for EVs. Years ago, even smaller municipalities converted vehicle fleets to electric. And they hired local companies to build those EVs. Now, 50% of new vehicles sold in China are EVs. This number is still a pipe dream for the U.S. and Europe.

When foreign countries, such as Tesla, tried to capitalize on China’s exploding EV market the Chinese government required they buy local batteries. The result is the world’s biggest market for EV batteries.

Chinese factory worker building batteries for EVs in a factory.
Chinese battery plant | STR/AFP via Getty Images

This sort of scale made it cost-effective for Chinese companies to control every aspect of the EV battery supply chain. These companies bought huge shares in mines where EV battery components come from. They also built facilities to refine the raw materials. Finally, Chinese R&D has gone a long way to making simpler and cheaper EV batteries by using more common elements. (This latest technology is called a Lithium Iron Phosphate battery, or an LFP).

The result is that the vast majority of EVs in the world today use Chinese batteries. When the Biden administration stipulated that only EVs with 51% non-Chinese battery materials would qualify for the federal tax credit, the law disqualified 80% of models for sale in the U.S.

Ford is hustling to catch up with GM’s Ultium EV battery technology (developed in partnership with South Korea’s LG). It decided to set up an LFP battery production plant in Marshall, Michigan. But it is turning to a partnership with China-based CATL to develop this plant. When asked if there was a viable alternative to partnering with a Chinese company, Ford’s CEO, Jim Farley, said, “No, there wasn’t. LFP technology is very well developed. The battery business is a global business. And there were no alternatives.”

Countless Chinese EVs stacked on racks on a dock before export on a ship in the background.
Chinese EVs for export | AFP/China Out via Getty Images

If China’s past decade can teach us anything, it’s that building a supply chain robust enough to produce cheap EV batteries domestically takes time. As the old proverb goes, “The best time to plant a tree was ten years ago.”

As the U.S. struggles to transition to EVs and reduce emissions, our country must make some difficult decisions. Electric Vehicles cost too much for many drivers. And 40% of that price tag is for the battery. So if EVs are to become mainstream soon, some of them–or at least their batteries–may have to come from China.

You can learn more about how China is winning the EV war in the video below:

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Staff Writer

Henry Cesari

Henry Cesari joined MotorBiscuit in 2021 and brings his deep interest in vintage cars, trucks, and motorcycles to the site. Having restored his first classic car at just 16 years old, Henry has wrenched on everything from overland campers to Japanese motorcycles and even pre-war Bugattis. Henry is also an avid attendee at local car shows and genuinely enjoys connecting with fellow auto enthusiasts.

Henry earned a Bachelor’s in Anthropology and English from the University of Vermont. He has since incorporated his love of the written word with his admiration of classic cars. While Henry is interested in vintage cars, he believes the golden age of cars is yet to come. He is confident journalists will play an important role in this revolution by exposing the industry as it is now and envisioning its possible future.