The Geopolitics of Tesla’s China Breakthrough
- by The Diplomat
- May 02, 2024
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Amid growing concerns about China’s EV overcapacity, the U.S. firm wins rare access to the Chinese market.
By . However, the significant cost advantages of China-made EVs do not stem directly from government subsidies.
China’s rise in the EV sector is the result of deliberate and pragmatic policies that align government intervention with market dynamics. In 2010, new energy vehicles were designated as one of China’s seven strategic emerging industries, yet the dominant technology remained uncertain. It wasn’t until 2014 that the industry reached a consensus on hybrid and battery EVs as the domain for new energy vehicles. Subsequently, the government launched a decade-long national subsidy program for EVs.
EVs are not a Chinese invention, yet China’s industrial prowess has transformed these technological breakthroughs into cost-efficient products. In 2014, Musk made Tesla’s
patents
, including 51 design patents and 935 invention patents, openly accessible. While all EV makers have had access to these patents, they appear to have catalyzed significant advancements primarily in China.
The government’s early involvement, particularly through policies and subsidies aimed at stimulating R&D, technological standardization, and environmentally sustainable solutions, has greatly accelerated the production and adoption of EVs in China.
China’s immense market size and extensive production capacity serve as foundational pillars for its competitive edge. Leveraging these assets, Tesla has emerged as one of the foremost global manufacturers of EVs. Concurrently, Tesla’s presence has exerted a significant influence on China’s EV sector. Beyond sharing its patents, the company has actively contributed to the development of local EV supply chains, facilitated by the spillover effects from its Gigafactory in Shanghai.
Indeed, China’s cost advantages in EVs are showcased by its secondary innovation capabilities, which include rapid market responses and agile, flexible production facilitated by geographically proximate supply chains. Now, to continue benefiting from China’s market, global car makers from Germany, Japan, and South Korea are
adopting
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