The global shift to electric vehicles has left famous carmakers in Germany, Japan, and the US struggling to cope with intense competition from Chinese electric vehicle manufacturers. Volkswagen, once the biggest carmaker in China, now has a bit part. In June, it announced plans to cut 100,000 jobs worldwide.
The global shift to electric vehicles has left famous carmakers in Germany, Japan, and the US struggling to cope with intense competition from Chinese electric vehicle manufacturers.
Volkswagen, once the biggest carmaker in China, now has a bit part. In June, it announced plans to cut 100,000 jobs worldwide. Honda CEO Toshihiro Mibe admitted that manufacturers have 'no chance' against Chinese electric vehicle manufacturers after visiting a high-tech EV factory in Shanghai. Months earlier, Ford CEO Jim Farley warned Western carmakers were 'in a fight for our lives'.
The global shift to EVs has accelerated amid the US-Iran conflict. China's rise wasn't a given. It was a gamble. But it is now paying off, and legacy automakers are struggling to cope.
The Chinese car industry has been developing since 1949 when the new People's Republic of China established its first car factory to reduce reliance on imports and develop manufacturing strength. In the late 1970s, leader Deng Xiaoping began opening China to outside investment - including the car industry. During the 1980s and 1990s, local automakers partnered with foreign carmakers to manufacture their cars in Chinese factories. This gave Chinese automakers access to the technological know-how of experienced foreign firms.
Between 2009 and 2022, Chinese authorities handed out over $41billion in tax breaks and subsidies to develop electric cars, taxis and buses. The only solution was to focus on new technologies. Electric vehicles were almost nonexistent in the early 2000s. Tesla would only release its first EV in 2008.
But China's leaders bet heavily on an electric future, investing in the industry and making ambitious plans to encourage existing carmakers and startups. Success was not guaranteed. In the early 20th century, EVs outsold combustion engine cars. But battery technology wasn't good enough.
From the 1960s onwards, US automaker General Motors repeatedly tried to develop EV models only to shelve them due to internal pressures, external scepticism and a lack of charging infrastructure. The most famous was the EV1, briefly available during the late 1990s. Production ended in 2003. That same year, Chinese leaders announced EVs would be a priority in the country's new Five-Year Plan, focusing on batteries and other technologies.
The world's biggest manufacturer of EV batteries, CATL, began life as a battery manufacturer for consumer electronics. BYD had similar beginnings before moving into combustion engine cars and then EVs. It's now the world's largest EV manufacturer. Subsidies and growing demand turned both companies into giants.
Intense competition drove innovation, but also led to price wars and a 'brutal' domestic market. This increased the importance of exports. Established Western carmakers operate in a different context. Changing political cycles mean there's less certainty about government backing.
Their typically older consumer base is more attached to combustion engines. Experimental EV models were never given the backing to scale up. As more and more drivers go electric, esteemed brands and luxury carmakers have been forced to close factories and scrambled to stay relevant. In 2025, Chinese factories produced almost 75 per cent of the world's EVs.
The global shift to EVs has accelerated amid the US-Iran conflict. China's rise wasn't a given. It was a gamble. But it is now paying off, and legacy automakers are struggling to cope
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