When Tesla entered China in 2014, the country’s EV market was going through a reset. The Austin, Texas-based automaker created a catfish effect — a strong competitor that compels weaker peers to up their game — in China’s EV market for the past few years. Now, Tesla’s sardine-sized Chinese competitors have grown into big fishes in the tank, gradually weakening Tesla’s own prominence in the field.
2021 was a banner year for China’s EV industry. The latest data from the China Passenger Car Association shows that total passenger EV sales in China in 2021 jumped 169.1% from a year ago to nearly 2.99 million: about half of all EVs sold globally. Out of every 100 passenger cars sold in China last year, almost 15 were so-called "new energy vehicles" (NEVs) — a mix of battery-electric vehicles and hybrids.
China’s record EV sales and market share dwarfed the U.S. numbers, despite President Joe Biden’s pushes. Cumulatively, the U.S. saw sales of 607,567 light-duty electric and hybrid vehicles in 2021, less than 20% of China’s sales. As a percentage it’s no better: EVs made up merely 4% of total U.S. auto sales last year, nearly 11 percentage points below China’s rate and far from the White House’s target of 50% by 2030.
Graph: AJ Caughey
China’s homegrown EV brands — dubbed “the new force”（新势力) in Chinese — such as XPeng and NIO, as well as traditional automakers like Geely and BYD, allsaw record EV sales last year. Tesla also enjoyed exponential growth in China, ranking No. 3 by annual sales.
“Tesla might have been the lone winner for a few years,” Lei Xing, a Massachusetts-based auto expert and a co-host of the China EVs & More podcast, told Protocol. “But from this point on, it will likely face fierce competition in China.”
BYD, a Chinese battery and electric carmaker backed by the U.S. investor Warren Buffett, took the throne by sales for the second consecutive year. The Shenzhen-based company sold about 584,000 EVs throughout 2021, more than doubling its 2020 sales number, according to CPCA. Its sales were largely boosted by budget-friendly plug-in hybrids. Ranked No. 2 by sales was SAIC-GM-Wuling, a joint venture between SAIC Motor, General Motors, and Liuzhou Wuling Motors. Wuling makes some of the best-selling EV models in China — mini EVs that cost around $5,000 each, a tenth of the Tesla Model 3 price. The company sold more than 430,000 EVs.
Tesla booked record sales in China, too. Owning a Tesla is a status symbol in China, just as it is in the U.S. The U.S. EV maker sold more than 320,000 cars in China last year. Notably, Tesla’s Shanghai factory delivered a total of 480,000 vehicles in 2021, accounting for around half of its global deliveries.
Graph: AJ Caughey
The Chinese EV industry’s stunning 2021 performance didn’t come out of nowhere: Favorable policies supporting this industry started over a decade ago. From 2010 to 2016, the central government subsidized almost every electric or hybrid vehicle purchase by as much as $10,000; the subsidy amount dwindled after 2016, and many cars, from hybrid vehicles to small-sized ones, were eliminated from the qualified categories. But the heavy subsidies spurred the growth of the “new force,“ as well as the world’s largest battery supplier: CATL.
In a 2020 policy paper released by the State Council, Beijing spelled out its plan to reach 20% penetration of new energy vehicles by 2025. By 2035, the government envisions EVs will become the dominant new cars sold in the country.
The country’s monthly EV sales accounted for over 10% of total auto sales in China for the first time last March. By November, the monthly EV market share surpassed the 20% threshold, and then again in December.
As Beijing continues its heavy push to produce more energy-saving vehicles, not only is every traditional auto maker releasing electricity-powered models, competing with the NIOs and XPengs, but many internet companies have also joined the race. Tesla played no small role in catalyzing the Chinese EV market, Xing said, as “it has helped build the entire supply chain around its Shanghai factory.”
China also boasts the world’s largest public charging network. The China Electric Vehicle Charging Infrastructure Promotion Alliance reported over 2.6 million charging stations throughout the country in 2021, up 70% from 2020. That’s about one charging station for every three EVs on the road in China. And the country is planning to build enough charging stations for 20 million EVs by 2025. By comparison, the U.S. has only about 47,000 EV charging stations, or one charger for roughly every 35 cars.
Last year’s frenzied growth may not be repeated in 2022. The subsidies for purchasing electric vehicles have been cut by another 30% this year, and by the end of the year, Beijing will sunset government-paid EV subsidies. Xing told Protocol one of the reasons the Chinese EV market exploded in 2021 was that everyone knew heavy subsidies would be phased out in 2022. The 30% slash in subsidies can translate to a cross-industry EV price hike. The ongoing global chip shortage and price increases for lithium batteries will make it even harder for carmakers to bring costs down.
Still, analysts expect EV sales to continue booming in 2022, and China may hit the 20% EV market share goal earlier than planned. The CPCA has revised the forecast of 2022 total passenger EV sales — including retail and wholesale — to 5.5 million units from the previously set 4.8 million, with a new energy passenger car penetration rate of about 25%.
AJ Caughey contributed research to this report.