The Growing Electric Vehicle Industry in China - The Next Tesla?

EXPONENTIAL GROWTH OF THE ELECTRIC VEHICLE INDUSTRY IN CHINA IN THE PAST 50 YEARS 

• Electric Vehicles (EV) are generally cheaper in China, starting from £18,000

• This is mostly due to high government subsidies and low labour cost

• A notable company that experienced an exponential growth in the past 50 years is BYD

• BYD overtook Tesla in 2024 and became the world’s best-selling maker of EVs

  
  

WHAT LED TO THE GROWTH OF THE EV INDUSTRY IN CHINA?

• In 2024, close to 65% of battery and plug-in hybrid cars were sold in China

• Increasing demand ultimately led to more foreign companies wanting to access China’s market

• However, China’s market is made rather inaccessible, due to two main factors

  
  

CHINA’S MARKET

• To access the Chinese market, most companies are required to undergo “forced technology transfers” 

• In other words, companies must share information about their technology to China

• Another factor is the high government subsidy to local EV companies

• That led to more fierce price competition as domestic firms have governmental support

SCEPTICISM AND DISTRUST

• China has been alleged of intellectual property theft

• The US, and other countries have imposed heavy import tariffs on Chinese EVs, as high as 100%

• There are also concerns about national security, espionage, and hacking related to Chinese EVs 

• Western governments fear potential cybersecurity risks through connection of phones to car e.g., apple carplay

• Risks include accessing GPS, breach of personal data, listening in etc. 

• Military and intelligence chiefs had been ordered not to discuss official business while riding in EVs (not only from China)

• It was also rumoured that cars with Chinese components had also been banned from sensitive military sites

  
  

HOW CAN LAW FIRMS BE INVOLVED IN THIS?

• Growing EV companies in China might seek advice from international law firms that are familiar with cross-border jurisdictions, on competition, World Trade Organisation disputes or government regulations etc.

• Law firms that specialises in cybersecurity e.g., Bird & Bird, Bristows LLP etc. might advice governments or Chinese EV companies on the sensitive matter of data breach or hacking etc.

PESTLE ANALYSIS

POLITICAL

China’s increasing dominance in the global EV market may lead to increased trade tensions. Coupled with the ongoing trade war between the US and China, it might lead to a global trading ‘attack’ on China. As a result, China might be even more geopolitically isolated. 

Moreover, by providing subsidies to companies like BYD, China is deliberately manipulating a supposedly ‘free’ market, which might exacerbate the already worsening relationship between China and Western countries.

ECONOMICAL

Global competitiveness of other EV companies will be threatened by the low cost that Chinese firms can afford. The economic shift towards green technologies could also lead to more foreign investment in China’s EV sector. This can reduce the profit of other EV companies, such as Tesla, potentially decreasing the government's tax revenue.

SOCIAL

As mentioned, increased tariffs and geopolitical tension might slow down the rate of globalisation, or worse, lead to a fragmentation of the global EV market, where countries and regions begin to be more isolated and protectionist. This slows down international collaboration and innovation, and companies would face higher barriers to entering foreign markets.

TECHNOLOGICAL

Due to the subsidies provided by China, BYD and other Chinese EV companies will have more funds for their R&D (research and development) initiatives. As such, new technology that is either more cost-efficient or environmentally friendly will be developed. This will give China a more competitive edge, leading to further international tension.

LEGAL

With the development of new technology comes potential intellectual property (IP) disputes. Foreign companies may be wary of disclosing proprietary technology and trade secrets in exchange for market access, as in the case of China. Law firms will be central in negotiating contracts, setting up IP protection mechanisms, and handling any resulting disputes or infringements.

ENVIRONMENTAL

As mentioned, China’s subsidy leads to more R&D funds and more environmentally friendly technology being invented. This can reduce carbon emissions and slow down global warming. 

Moreover, as the effect of globalisation slows down or even reverses, carbon emitted by shipping and production might reduce, contributing more to battling global warming.