China’s electric vehicle (EV) market has been expanding at an unprecedented pace. Last year, EVs accounted for 48% of new car sales, surpassing the country’s 2030 target of 40% more than five years ahead of schedule. In the second half of the year, penetration reached 52% of new sales. Industry observers say this rapid momentum is being driven by strong state support, intense competition and rapid advancements in battery and smart vehicle technologies.
Policy Support
Government support has been instrumental to China’s EV boom. Since 2009, Beijing has provided subsidies to encourage EV research and development. In the past decade, BYD and CATL, the world’s largest EV and battery makers, together received over 30 billion yuan ($4.2 billion) of government grants, according to company reports analyzed by Energy Intelligence. Yet, Beijing’s support for the EV and battery sectors since 2009 has totaled more than $230 billion, estimates the Center for Strategic and International Studies, a policy research organization.
Besides funding innovation, Beijing has also been actively promoting the adoption of EVs through a range of incentives and preferential policies. Governments at various levels have introduced measures such as tax breaks and free license plates for EVs, too. In major cities like Beijing and Shanghai, obtaining a license plate for a traditional gasoline-powered vehicle is both expensive and increasingly difficult.
Another boost came a year ago when Beijing announced measures to stimulate the economy, offering sizable trade-in subsidies for a range of product categories, with EVs taking the biggest share. Goldman Sachs estimates that China doled out roughly 90 billion yuan ($12.4 billion) in automobile trade in programs last year, with approximately 60% directed toward EVs. Consumers buying an EV received a 20,000 yuan ($2,766) subsidy per vehicle — over 30% higher than for gasoline cars.
Crowded Market
Yet, China’s subsidy programs are not “exceptionally generous compared to other countries,” said George Whitcombe, research analyst at Rho Motion, a research firm. A big factor that is driving costs down and fast adoption is that China has a “fiercely price-competitive market,” he explained, adding that the market still grew by 31% in 2023 without the subsidy scheme.
China’s state-led approach has fostered an ultra-competitive market in the world’s biggest automobile market. According to AutoHome, a Beijing-based auto information provider, the market currently offers over 700 EV models across all price segments, with more than 300 of these costing under 150,000 yuan ($20,000).
Competition is set to intensify further this year. Goldman Sachs expects another 120 new EV models to launch in 2025, up from 112 in 2024. The relentless price war among EV manufacturers has driven significant cost reductions, with 130 models seeing an average price cut of 9.2% last year, according to the China Automobile Dealers Association.
Cost Disparity
Thanks to the rapid expansion of the EV industry and heated competition, China is already ahead of the curve in reaching cost parity between EVs and internal combustion engine (ICE) vehicles. The International Energy Agency estimates that over 60% of EVs sold in China in 2023 were cheaper than their gasoline counterparts. This cost advantage stems from government subsidies, competitive financing schemes and automaker-led incentives, such as low-cost loans and insurance discounts.
“We track [EV prices] on a segment by segment basis,” Whitcombe said. On a sale weighted average price, EV prices in China were 7% lower than those of ICE cars in February this year, he told Energy Intelligence.
Beyond the purchase price, EVs offer substantial operational savings. “The price of charging is only one-tenth of [the] price of gasoline,” said Fairy Wang, an expert at Sinopec Economics & Development Research Institute, at CERAWeek by S&P Global in Houston. “That’s why common people just choose EVs,” — because they are cheap and enjoy great economics, Wang noted. Jian Pan, co-chairman of CATL, added that while the cost savings may not always reach 90%, EVs typically reduce energy expenses by 30%–40%.
Cutting-Edge Technology
Cost efficiency isn’t the only driver of China’s EV boom, Pan said. Smart features and advanced connectivity of EVs have further strengthened their appeal, he notes, highlighting that EVs are not just about affordability but also about cutting-edge driving experiences. “Consumers are drawn to the intelligent features of EVs — self-parking, autonomous driving capabilities and a level of connectivity that traditional gasoline cars simply can’t provide,” he said at CERAWeek.
One of the latest advancements is the rise of advanced driver assistance systems (ADAS). Goldman Sachs forecasts that China’s ADAS-equipped passenger vehicle segment will grow at a 32% compound annual growth rate between 2024 and 2030, reaching 70% penetration of vehicle sales — or 17.3 million units — by the end of the decade. Features like BYD’s newly launched Navigation on Autopilot system — an ADAS technology available even in its lower-end models — are becoming industry standards, says the bank.
China also leads in battery technology, addressing range anxiety with next-generation solutions. BYD and CATL, among others, have introduced batteries capable of 1,000 kilometers (620 miles) per charge and are working to develop solid state batteries, too. This week, BYD announced a new charging technology that can add 400 km (250 miles) of range in just five minutes.
Charging Ahead
Analysts expect strong momentum to persist. EVs are projected to account for 60% of new car sales in 2025, driven by continued policy support and intensifying market competition. Goldman Sachs forecasts China’s domestic EV sales reaching 16.8 million units in 2026 and 18.3 million in 2027, with penetration rates of 70% and 75%, respectively. By 2030, EVs could make up 85% of the market for new vehicles.
