China’s technological catch-up and leapfrogging in electric vehicles: A firm-level study of BYD and CATL

This article examines how Chinese firms BYD and CATL achieved technological catch-up and became global leaders in electric vehicles and EV batteries, disrupting the automotive industry. The global value chain (GVC) and global production network (GPN) approaches struggle to explain how latecomer firms not only join global networks but also transform into lead firms themselves. The article addresses this gap by integrating insights from the economics of innovation literature and putting firm-level technological effort at the centre of analysis. It develops and applies a technological catch-up matrix that captures firm-level effort across five dimensions: proprietary knowledge, organizational capabilities, capital investment, market demand, and local supporting nexus. The article finds that BYD and CATL’s success is based on their early investments in lithium-ion battery technology for EVs beginning in the mid-2000s, preceding and actively shaping government industrial policies rather than merely responding to them. Both firms leveraged existing capabilities from China’s consumer electronics battery sector while building automotive-specific knowledge and capabilities through strategic partnerships with incumbents and recruitment of foreign expertise. The article’s comparative analysis of BYD and CATL with other Chinese EV and EV battery firms demonstrates that while government industrial policies were necessary, firm-level technological effort was equally crucial for achieving market leadership. The article contributes to understanding latecomer industrialization by showing how firms escape subordinated positions in global production networks through systematic technological effort, challenging explanations that attribute China’s EV success exclusively to government intervention.