Abstract

"Creating China’s Leadership in the Energy Transition of the Automobile Industry: Industrial Policies and Sustainable Regulations"

Yuan Jia Zheng, Harvard Business School (yuan.jia19@gmail.com)

China emerged as a global leader in the energy transition of the automobile industry, becoming the world’s largest market, manufacturer, and exporter of electric vehicles (EVs). In 2023 alone, 8.1 million new electric cars—representing 60 percent of global new EV registrations—were sold in China. Domestically, 25 percent of new registrations were EVs, far surpassing the 14.6 percent in the European Union and 7.6 percent in the United States. This paper argues that China’s success in vehicle electrification stems from competitive advantages built through persistent state intervention, flexible and coherent industrial policies with a long-term vision, and dynamic cooperation between public and private actors since the 1980s. The paper examines the crucial role of Chinese government plans and programs, such as the "Ten Cities, Thousand Vehicles" project launched in 2009, as examples of China's socialist market economy model. This model enabled coordinated action at both national and subnational levels and fostered dynamic interactions between public and private sectors. State support for upgrading the automobile industry promoted heavy investment from both existing automakers and a surge of new EV manufacturers with core technologies competing at international standards. Therefore, China’s leap from lagging in internal combustion vehicle technologies to leading the global EV market further underscores the importance of a long-term strategic approach. In contrast, the EU struggled to create national champions through similar green policies. The rising tariffs on allegedly low-cost Chinese EVs entering Europe highlight tensions between the EU’s green goals and its protectionist responses to external competition. The findings unveiled significant implications for the sustainable development in the global automotive industry.