The electric vehicle (EV) industry is projected to grow significantly, with around 18 million EVs expected to be manufactured next year, up from 10.5 million the previous year. However, this growth in capacity does not necessarily equate to overcapacity. The dynamics of the EV industry are complex, with high-cost producers facing challenges in high-priced markets, particularly in the US. The industry is going through stages of growth, proliferation, and consolidation, with China consolidating its EV sector and many US EV start-ups struggling.
The proliferation of EV start-ups is largely driven by venture capitalists’ optimistic view of the trillion-dollar market potential and high valuations of market leaders like Tesla and BYD. While the US has yet to produce another success story like Tesla, Chinese suppliers lead in affordable plug-in hybrid electric vehicles (PHEVs), which may be better suited for the US market. US efforts to increase EV demand by attracting companies like BYD to set up production in partnership with GM or Ford could help bridge the gap between supply and demand.
China’s EV industry has surpassed the US in terms of production capacity and market dominance, with strong government support and local government initiatives driving growth. While industrial policies have historically been used to promote specific industries in other countries, China’s EV industry has matured to a point where government support is less critical. The US faces challenges in maintaining competitiveness in the face of China’s dominance, particularly in terms of EV technology and manufacturing capacity.
The quality of China’s highly competitive green technology capabilities is more concerning to the EU and the US than the quantity of production capacities. The evolving green tech landscape is shaped by economic ambitions, environmental imperatives, and geopolitical rivalries, leading to US-China tensions over industrial strategies and resource allocation. To effectively compete in the green tech sector, the US needs to invest in EV charging infrastructure, battery supply, and affordable EV options, areas where China currently excels.
Efforts to address the complex challenges facing the green tech industry require a shift from zero-sum mentalities towards cooperative competition and interconnectedness. By fostering a framework for win-win cooperation between the US and China, it may be possible to synergize their green tech ecosystems and overcome barriers to innovation and development. Ultimately, a more collaborative approach to addressing the challenges of the EV industry may lead to greater success for both countries in the global market.
