Busting the Myth on ‘Overcapacity’ of Electric Cars
A recent Bloomberg report challenges the common assertion that China’s success in the electric vehicle (EV) market is solely due to ‘overcapacity’ and government subsidies. The report, authored by David Fickling, points out that European and American automakers also receive substantial government support. For example, Volkswagen received more subsidies in 2023 than all Chinese automakers combined, and Ford also benefited more than any of its Chinese competitors.
The claim of ‘overcapacity’ appears false. Chinese EVs have rapidly advanced in quality and are often superior to their American and European counterparts. The U.S. is likely to maintain protectionist measures, effectively closing its market to more affordable and often better-performing Chinese EVs. However, neither U.S. nor European EV manufacturers will be able to effectively compete with Chinese EVs in third-market countries.
BYD’s Rise and China’s EV Revolution
According to the South China Morning Post (SCMP), the Chinese automaker BYD (Build Your Dream) surpassed Tesla in pure-EV sales within China in 2023. In the fourth quarter of that year, BYD sold 526,409 pure EVs, while Tesla sold 484,507. In the full year of 2023, BYD sold over 3 million EVs and hybrids. China now boasts a diverse array of EV manufacturers and exported 1.5 million EVs in 2023, not including hybrids.
Bloomberg reports BYD’s continued success: “Chinese EV and hybrid carmaker BYD sold 500,526 vehicles in October (2024); 310,912 of those were plug-in hybrids… 31,200 of BYD’s sales came from outside China.” BYD’s revenue of $28.3 billion exceeded Tesla’s for the same period.
Over the past decade, China has emerged as a leader in technology-intensive products, including electric vehicles, lithium-ion batteries, solar power (photovoltaics), wind power, modular nuclear power, long-distance power transmission, and 5.5G (soon to be 6G) technology.
BYD, China’s leading electric automaker, recently launched its new Qin L and Seal 06 models. Both models boast a range of 1,305 miles on a fully charged battery and a full tank, and cost just $13,767.
Since July 2024, EVs and hybrids have accounted for more than half of all car sales in China. Chinese consumers purchase significantly more cars than Americans; in August, 53.9% of new vehicle purchases in China were electric, totaling 1.03 million EVs sold. Government incentives for EVs, coupled with the rapid expansion of fast-charging stations, are further fueling this trend. For a limited time, citizens who replaced a gas-powered car with an EV received a subsidy of US$2,770 per car. Independent estimates suggest that by 2030, three out of five new vehicles sold will be electric.
Global Perspective: Norway’s EV Leadership and Saudi Arabia’s Investment
Norway is leading the global transition to EVs. According to the BBC, 90% of new cars sold in Norway in 2024 were electric, up from 82.4% in 2023. With a population of just 5.5 million, Norway has invested in recharge stations across the country. In comparison, the U.K. saw 20% of new car sales being EVs, while the U.S. was barely at 8% in 2024.
While electric batteries may lose up to 20% of their range in cold climates, this is less of a concern with the abundance of recharge stations. For the last 30 years, Norway has encouraged EV adoption by exempting them from taxes and raising the price of petroleum fuel. Furthermore, Norway removed import duties on EVs and provided toll road discounts and free parking. Norway imposes no restrictions on purchasing gasoline-powered cars, leaving the choice entirely with the consumer. The country anticipates becoming essentially fully EV by 2027.
Norway’s wealth, derived from substantial oil and natural gas exports, has allowed it to build a national wealth fund of over US$1.7 trillion. Their financial robustness means they aren’t worried about a loss of income from the transition to EVs. Moreover, Norway generates 88% of its electricity from hydropower plants.
Saudi Arabia, a major oil-exporting nation, has recognized the global shift toward electric vehicles and is actively increasing its investments in mining and metal industries worldwide, particularly in Africa. According to SCMP, this includes acquiring a 10% share of Vale Base Metals for $2.5 billion and signing mining memorandums with Egypt, Morocco, Congo, Russia, and Turkey. This shift in investment strategy signals a proactive move to adapt to the evolving energy landscape.
As the world transitions to EVs, the demand for oil will fall, significantly reducing profits. This change is dramatically decreasing the appetite of American oil companies to pursue the model of “drill, baby drill.”
