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China vs. World: Who Wins the EV Race?

Date

February 14, 2025

Author

Kirill Patyrykin, Vasilii Allenov

As the global automotive industry pivots towards electric vehicles (EVs), a fundamental question emerges: can European and American automakers compete with China? To answer this, we must compare these regions across four key areas: resource capacities, production capabilities, product costs, and quality. The prevailing thesis suggests that China holds a decisive advantage in all these categories, raising broader concerns about the viability of Western green policies.

The European Union has recently tightened its automotive carbon dioxide emissions standards, effective from January 1, 2025. Under these new regulations, at least 20% of vehicles sold must be electric to avoid penalties. However, current EV sales in the region stand at only 13%, according to the European Automobile Manufacturers' Association (ACEA). This shortfall indicates that many automakers may struggle to meet the new targets, potentially facing significant fines (Guillaume & Parodi, 2024).

In contrast, China has rapidly expanded its EV market, with 44% share of all new car sales being EVs as of December 2024. This dominance is attributed to substantial government support, extensive production capabilities, and aggressive market strategies (Murali & Selvaraju, 2024).

The disparity between China's aggressive EV expansion and the West's more measured approach raises critical questions about the future of the global automotive industry. Is the European Union's regulatory framework inadvertently disadvantaging its own automakers? Can Western manufacturers scale up their EV production and adoption rates to meet these new standards without compromising profitability? Furthermore, how will the West respond to China's competitive pricing and technological advancements in the EV sector?

These questions underscore the complexities of environmental policies and industrial competitiveness. As the West endeavors to transition to greener transportation solutions, it must carefully balance regulatory ambitions with the practical realities of global market dynamics.

Resource Capacities: Lithium and Production Metals

The foundation of EV production lies in critical materials like lithium, cobalt, and nickel. China dominates this space, and not because of its raw material reserves but due to its control over the global supply chain.

Though China holds only about 7% of the world's lithium reserves, it processes over 60% of global lithium and controls 80% of battery-grade graphite production. Additionally, it has made aggressive investments in mining operations across Africa, South America, and Australia.

The EU and the U.S. have some lithium deposits (notably in Germany, Portugal, and Nevada), but their refining and processing capabilities are severely limited. Western attempts to develop local supply chains face long permitting processes and environmental opposition.

China's grip on battery materials means that European and American automakers are highly dependent on Chinese suppliers. Unless Western nations ramp up local refining capacity, they will struggle to compete.

Production Capacities: Factories and Scale

China’s dominance in EV production stems from its vast manufacturing ecosystem and state-backed industrial policy.

China: The country boasts the world’s largest EV manufacturing base, producing over 9 million EVs in 2023. Companies like BYD and CATL operate at unmatched scales, with the ability to rapidly expand and cut costs (Murali & Selvaraju, 2024).

EU & US: Tesla remains a leader, but legacy automakers like Volkswagen, Ford, and GM lag behind. European automakers are struggling with high labor costs, slow factory conversion rates, and insufficient battery production. The U.S. is investing heavily in domestic battery plants, but they remain years away from competing at scale.

China’s efficiency and government support mean that it can outproduce Western automakers at a fraction of the cost.

Product Cost: Affordability vs. Western Pricing Challenges

Price remains a decisive factor in EV adoption, and Chinese brands hold a significant edge.

China: Chinese EVs are considerably cheaper. For example, the BYD Dolphin sells for under $20,000, while models from NIO and XPeng provide luxury features at lower prices than their European and American counterparts.

EU & US: Western automakers struggle with higher production costs, expensive labor, and slower innovation cycles. Even with price cuts, vehicles like the Volkswagen ID.3 (€30,000) remain uncompetitive against Chinese offerings. Government subsidies help, but long-term affordability is questionable.

Unless Western automakers find ways to significantly lower production costs, they risk losing their home markets to Chinese imports.

Product Quality: Performance, Reliability, and Perception

Chinese automakers once faced criticism over quality, but recent advancements tell a different story.

China: Companies like NIO, XPeng, and BYD now receive high ratings for reliability and technology integration. The BYD Seal, for example, competes directly with the Tesla Model 3 and has been praised for its range and build quality. It is sold in such markets as EU, UK, and Japan, where Chinese manufactures were not represented before.

EU & US: While Tesla remains an innovation leader, traditional automakers are playing catch-up. Many Western brands suffer from software issues, poor battery efficiency, and slower technological adoption compared to their Chinese counterparts.

Chinese EVs are no longer just "cheaper alternatives", they are now competitive in quality, further threatening Western market positions.

The Bigger Picture: Can the Green Agenda Survive?

If China secures dominance across all these factors, it raises a fundamental challenge: Can the West sustain its EV transition without relying on Chinese production?

If Europe and the U.S. cannot match China in production cost, supply chains, and innovation, their ambitious green policies may collapse under economic pressure.

Heavy tariffs and protectionist measures could slow Chinese imports, but they risk making EVs too expensive for mass adoption.

Western automakers must accelerate battery supply chain development, improve cost efficiency, and enhance quality to remain competitive.

Is the Outcome Already Decided?

At present, China leads on every front, with a widening margin. Western automakers face significant obstacles in reclaiming ground, and unless urgent measures are taken, the future of the global EV market may be firmly under China’s control. If this trajectory continues, the West’s broader green agenda, heavily reliant on EV adoption, will come under serious scrutiny.

The next few years will determine whether Europe and America can mount a serious challenge or if they are destined to play catch-up in an industry they once led.