Comment on “China's Electric Vehicle Revolution: What Drove the Growth?”

Xing et al. (2026) offer a comprehensive and convincing explanation of the rapid growth of the electric vehicle (EV) industry in China. They argue that the growth was the result of a dynamic interplay between government policies and market forces. Policy interventions facilitated firms in overcoming entry barriers and created demand for EVs. Fierce competition among domestic EV manufacturers accelerated technological progress and cost reductions, making Chinese-made EVs competitive domestically and in other markets. Although I am generally supportive of Xing et al.'s (2026) interpretation, I am not convinced by their evaluation that China's EV policy had a “long-term commitment.” The phasing out of purchase subsidies for EVs was not as “gradual” as mentioned in Xing et al. (2026), but was rather a bumpy process. In March 2019, the Chinese government announced that the purchase subsidy for EVs would be reduced to half of the previous level by the end of June 2019 and that the subsidy program would terminate by the end of 2020 (21st Century Economic Herald, March 28, 2019). The policy change brought about a sharp decline in EV sales. EV sales decreased by 30% during the latter half of 2019 compared to the same period of 2018. To make matters worse, the COVID-19 pandemic in Wuhan and other cities in early 2020 caused EV sales to decrease further by 56% during the first 3 months of 2020. As can be seen in Xing et al.'s (2026), EV sales stagnated during 2019 and 2020. Had it not been for the announcement of the revival of the subsidy program in April 2020, China's EV industry would have fallen into decay. Indeed, many start-ups that had been gathering investments to start EV production, including Le TV, Shanghai Bojun Automobile, Byton, Singulato, and Qiantu Automobile, encountered financial difficulties and later went bankrupt. In April 2020, as a remedy for economic recovery, the Chinese government announced that the purchase subsidy for new EVs would be extended until the end of 2022, and that the amount of subsidy offered in 2020 would be only 10% less than the previous year's level. New EV sales recovered their growth momentum, increasing by 185.1% in 2021 and by 81.5% in 2022, respectively. Xing et al. (2026) also seem to overemphasize the government's openness to new entrants in EV production. They insist that “policymakers adopted a strategy of broad participation,” but in reality, the government announced in 2016 that it would adopt production licensing for EV production that denied entry to start-ups (Tang 2019). EV start-ups, or the so-called “new forces in car production (zaoche xin shili),” which tried to enter EV production, had to rely on incumbent automakers to manufacture EVs they had designed because they were not offered licenses. NIO outsourced its production to Jianghuai Automobile Group, XPeng to Haima Motor, Leapmotor to Hangzhou Changjiang Automobile, and Xiaomi to Beijing Auto. All the incumbent automakers that received production consignments from the start-ups were state-owned enterprises. The government later announced that firms that had reached 30,000 units and 3 billion yuan in cumulative sales of EVs (by outsourcing production to incumbent automakers) would be offered production licenses and now the four new entrants are producing EVs in their own factories. Although I agree with Xing et al.'s (2026) description that “the coexistence of innovative start-ups and established automakers” is an important feature of China's EV industry, this structure was created neither by governmental design nor by the policymakers' openness to new entrants. It was rather the result of the efforts made by the new entrants to overcome government restrictions by utilizing non-mainstream automakers. The government has always been restrictive toward new entry in the automotive industry, and the start-ups have tried to utilize non-mainstream incumbent manufacturers to bypass the restriction. Even BYD and Geely, the largest Chinese automakers today, had to acquire small state-owned automakers to get entry permission (Feng 2023). Xing et al. (2026) prompted me to wonder why it was China, not Japan, that became the global leader in the EV industry. In fact, Japanese automakers began producing EVs earlier than their Chinese rivals. Japan's Mitsubishi Motors started mass production of EVs in 2009, followed by Nissan in 2010. They were the first and second automakers to begin mass production of EVs in the world. The Japanese government provided generous subsidies for EV purchases. Buyers of Mitsubishi's EVs were entitled to receive 1.14 million yen (88 thousand yuan) per unit as a subsidy. The amount was greater than China's EV purchase subsidy at its peak (60 thousand yuan). The Japanese government also subsidized the building of EV charging stations. Despite all this government support, however, the share of EVs in Japanese automobile sales remains very low. In 2025, the sales volume of EVs accounted for only 3.2% of car sales in Japan. Among the factors that Xing et al. (2026) point out as being conducive to the growth of China's EV industry, the Japanese EV industry lacked “fierce competition.” For many years after 2010, Mitsubishi's “i-MiEV” and Nissan's “Leaf” were the only available EV models in the Japanese market. There were no new entrants focusing exclusively on EVs until the beginning of imports of Tesla's and BYD's EVs. While Xing et al. (2026) emphasize the acceleration of technological progress and reduction of production costs as effects of fierce competition, the enrichment of the variety of products may have been another important effect of competition. Under the pressure of competition, Chinese EV manufacturers provided a rich variety of EVs that could satisfy various tastes and needs of consumers. By contrast, the Japanese EV market remained stagnant because with only two models, Japanese-made EVs could not attract many customers. Xing et al. (2026) need to be more cautious in discussing the claim that “China maintained policies encouraging EV manufacturers to expand into global markets.” The purchase subsidy, the dual-credit policy, and the vehicle purchase tax exemption are obviously intended to promote domestic sales of EVs. By encouraging EV manufacturers to expand production and realize economies of scale, these policies may have positive impacts on export competitiveness, but that should be regarded as a side effect. Xing et al. (2026) need to specify the policies that promote EV manufacturers to go globally. Currently, the European Union imposes import tariffs ranging from 7.8% to 35.3% on EVs from China. Although Japan has yet to impose an import tariff on imports of Chinese EVs, the new subsidy program for EV purchase announced in April 2026 was very unfavorable to BYD's EVs, prompting BYD's manager in Japan to call for a “fair treatment.” Arguing that the Chinese government did encourage its EV manufacturers to penetrate foreign markets may provide the justification for the protective measures employed by the EU and Japan. The lesson that the EU and Japan should learn from China's experience in developing the EV industry as described in Xing et al. (2026) is the combination of government intervention and market competition. European and Japanese automobile manufacturers may need some protection because they are lagging far behind their Chinese rivals. If the protection is too high, however, it will dampen competition and weaken the domestic EV industry. The EU and Japan should consider utilizing Chinese EVs as a stimulus to developing domestic EV sales rather than regarding them as a threat.