China’s EV juggernaut: The success of industrial policy

Last of two parts

CHINA’s electric-vehicle (EV) industry did not emerge because markets happened to reward innovation, nor because entrepreneurs were suddenly liberated. It emerged because the Communist Party of China (CPC) treated industrial development as a political task and markets as instruments, not masters.

China’s dominance in electric vehicles is not a deviation from its economic model, but another case of its undertaking an “industrial policy,” instead of just relying on free markets and laissez-faire capitalism. The latter is really an ideology called neoliberalism that has brainwashed our economists and government officials.

From Mao to Deng to Xi, the party has never accepted the Anglo‑American belief that markets should decide a nation’s industrial fate. Even during Deng’s “reform and opening” period, when private enterprise expanded and prices were liberalized, the CPC never abandoned industrial policy. It merely changed its language. Planning became “guidance,” commands turned into “targets,” and state ownership evolved into state control exercised through finance, regulation, and party organization. The EV industry is simply the latest expression of that continuity.

Narrative

This matters because the West still treats China’s EV push as either a climate crusade or a copy of Tesla. Both miss the point. Climate change provided a convenient narrative; Tesla provided proof of concept. The real driver was the perception of China’s strategic vulnerability. By the early 2000s, China was the world’s largest car market yet remained subordinate. German and Japanese companies controlled engines, transmissions, and core platforms. Chinese firms assembled and sold, but did not command. To the CPC, this was unacceptable — not just economically, but politically.

Internal‑combustion technology was a dead end. Catching up would take decades, and even then China would remain dependent on foreign patents. Electric vehicles offered a rare opening: a technological discontinuity that reset the competitive field. The party recognized this early precisely because it does not leave such judgments to markets.

By 2009, EVs and new energy vehicles were designated “strategic emerging industries.” In liberal economies, such labels are aspirational. In China, they are directives. Once the party decides, the bureaucracy follows. Funding aligns. State banks lend. Provinces compete. Universities redirect research. Regulators rewrite rules. The market is not abolished — but it is enclosed within political objectives. Think tanks independent of the bureaucracy are mobilized to study the program and the issues it will face.

Crucially, the EV push did not stand alone. It was later folded explicitly into the broader “Made in China 2025” program, Beijing’s blueprint for moving China from the lower end of global manufacturing to its commanding heights. Often caricatured in the West as a nationalist slogan.

“Made in China 2025” was in fact a hard‑edged industrial plan. Its aim was not export volume, but technological control — reducing dependence on foreign suppliers in sectors the party considered politically and strategically sensitive.

Pillar

Under this framework, electric vehicles and batteries were only one pillar. Alongside them sat semiconductors, where China has poured capital into chip fabrication, design and advanced packaging to loosen US and Taiwanese chokeholds; aerospace, with the Commercial Aircraft Corp. of China set up in 2008, tasked to challenge the Boeing-Airbus global duopoly; and high‑speed rail, which combined technology absorption with scale to become a global export industry. Shipbuilding was pushed up the value chain toward LNG carriers, cruise ships and advanced naval vessels. Industrial robotics and precision machine tools were prioritized because they underpin every advanced manufacturing sector. Power equipment, medical devices, agricultural machinery, new materials, artificial intelligence, and next‑generation information technology rounded out the list.

Electric vehicles fit this logic perfectly. They pull together batteries, power electronics, software, sensors, materials science and large‑scale manufacturing — exactly the bundle of capabilities “Made in China 2025” was designed to cultivate. Success in EVs was never just about cars; it was about building an ecosystem of industrial competencies that would spill over into multiple strategic sectors.

Money came first, and in huge volumes. From 2009 onward, Beijing and local governments rolled out consumer rebates, tax exemptions, charging infrastructure, cheap land, subsidized power, grants, and soft loans. The state did not wait for consumers to choose EVs; it paid them to do so, attracting them with subsidies.

Only after more than a decade did Beijing begin phasing out national subsidies — by which time firms like BYD Auto Co., Ltd., now the largest, had already achieved scale, brand recognition and technological depth. Subsidies were never meant to be permanent. They were scaffolding.

Weapon

Regulation was deployed as an industrial weapon. The “dual‑credit” system forced automakers either to sell enough EVs or buy credits from those who did. Assembling only gasoline cars became financially punitive. Local governments tilted the field further by accelerating EV plate approvals and restricting new gasoline registrations.

Local‑content rules locked in advantage. Between 2015 and 2019, only EVs using Chinese‑made batteries qualified for subsidies. This excluded foreign battery suppliers, guaranteed volume for domestic champions like the biggest battery maker Contemporary Amperex Technology Ltd. (CATL) and BYD, and forced even foreign carmakers in China to rely on Chinese supply chains. The result is that Chinese firms dominate global battery capacity and expansion plans.

Batteries were the strategic choke point, and the party treated them as such. Rather than let the market decide, Beijing guided firms toward lithium‑iron‑phosphate chemistry — cheaper, safer, and aligned with China’s strengths in materials processing and mass manufacturing. CATL and BYD were not accidents; they were cultivated. Financing, land, research, and regulation followed party priorities.

Supply chains were never left to chance. Chinese firms secured lithium, cobalt and nickel abroad; built refining capacity at home; and came to dominate upstream processing. Today, China controls most of the world’s lithium refining, the bulk of cathode and anode production, and a decisive share of battery cell manufacturing. Even when raw materials are mined elsewhere, they almost always pass through Chinese processing before becoming batteries.

Scale

Scale converted policy into dominance. China’s vast domestic market, accelerated by mandates and subsidies, allowed EV makers to produce at volumes no competitor could match. High volumes compressed learning curves, slashed costs, and rapidly improved quality. What began as subsidized growth became self‑reinforcing advantage. Chinese EVs are now cheaper not because they are inferior, but because they are produced at a scale that competitors cannot easily replicate.

Around 2018, there were 500 EV startups that chased subsidies. Many failed, that by 2030, fewer than 50 are expected to survive. To Western economists, this was inefficiency. To the party, it was experimentation. Industrial learning at scale is never tidy. What mattered was not firm survival but capability accumulation. In our case, when a few semiconductor chips folded up in the 1970s, the Marcos government gave up all plans for shepherding the industry.

When the time came, the party picked winners and let the rest die. Subsidies were cut. Standards tightened. Credit dried up for weaker players. The result was guided Darwinism. Today, a handful of firms dominate China’s EV market, with BYD — responsible for roughly 30 percent of domestic EV sales — the most prominent beneficiary.

This dominance has spilled decisively into global markets. Chinese firms now account for the majority of global EV production and exports. They lead not only in finished vehicles but across the value chain: batteries, power electronics, motors, software integration, and charging equipment. In many segments, Western and Japanese automakers increasingly find themselves dependent on Chinese components even when selling “national” products.

Even Tesla fits this logic. Beijing allowed Tesla into China not as a concession to markets but as a calculated move. Tesla raised standards and accelerated learning. Chinese suppliers observed, adapted, and eventually competed. Technology transfer occurred not through theft, but through ecosystems deliberately designed by the state. Today, Tesla’s fiercest competitors are Chinese firms that learned in the same market Tesla helped mature. By 2025, Chinese produced 16.5 million EVs, or 70 percent of the global output, and exported 7.1 million, 27,000 of which was to the Philippines.

Tariffs

As Chinese EVs push into global markets, Western governments have responded with tariffs, investigations and industrial‑policy panic. Yet these measures come late. China’s advantage is no longer confined to price. It lies in integrated supply chains, manufacturing speed, design iteration, and the ability to flood markets with models tailored to local tastes.

Chinese EV makers are also entering the Philippine market through the country’s biggest conglomerate, the Ayala Group through specialized distributors, to ensure consumer financing and easy access to repairs and maintenance. BYD’s partnership with the Ayala‑led AC Mobility is the clearest signal: This is not a niche experiment but a long‑term strategic bet.

The lesson for the Philippines is clear. China’s EV success was not born of deregulation or market worship. It was built by a ruling party that has never believed markets alone can build a nation. Markets, in the CPC worldview, are useful servants — not masters. Here, even the central bank’s board has three members from the biggest banks in the country (BPI, BDO, and a Singapore investment bank) while the finance secretary is from the Gokongwei conglomerate. How would you expect our central bank to support any industrial policy?

China’s electric vehicles are the logical outcome of a political system that treats industrial policy as a permanent function of the state. To most countries in the West, and in the Philippines (but not in Vietnam, South Korea, and Malaysia), “industrial policy” is anathema, which is one major explanation why we’re falling way back from our Asian neighbors. It is another confirmation of the superiority of state-led economic management from a purely capitalist order.

---

Facebook: Rigoberto Tiglao

X: @bobitiglao

Website: www.rigobertotiglao.com

The post China’s EV juggernaut: The success of industrial policy first appeared on Rigoberto Tiglao.

China’s EV juggernaut: The success of industrial policy
Source: Breaking News PH