Study Reveals Substantial Subsidies Propelling BYD in EV Market

A recent study by Germany’s Kiel Institute for the World Economy sheds light on significant government subsidies received by China’s leading electric vehicle (EV) maker, BYD Co. The subsidy surge reflects Beijing’s strategic push to dominate clean technologies, particularly in the EV sector.

Rapid Increase in Subsidies:

The study indicates a substantial increase in direct government subsidies to BYD, soaring from €220 million in 2020 to €2.1 billion two years later. This surge in aid underscores China’s aggressive support for local EV manufacturers, facilitating their rapid expansion and dominance in domestic and international markets.

BYD’sBYD’s exponential growth, fueled by government subsidies, has allowed it to scale rapidly and gain significant market share, particularly in the European Union (EU). The influx of Chinese-made EVs, including those from BYD, Nio, and Geely, poses a challenge to Western manufacturers like Tesla and Volkswagen, intensifying the EV price war.

EU Investigation and Response:

The EU has launched a probe into allegedly unfair subsidies to Chinese companies, including BYD, SAIC, and Geely. Initial tariffs could be implemented as early as July to address market distortion and concerns about unfair competition. The EU aims to compete with China through initiatives like the €40 billion innovation fund.

China has dismissed the subsidy probe as protectionist and argues that its EV manufacturers excel due to superior products and technological innovation rather than excessive government support. Chinese Minister of Commerce Wang Wentao emphasized the role of continuous technological innovation and advanced local supply chains in driving China’sChina’s EV industry.

Implications and Negotiations:

The substantial government support received by BYD underscores the need for international negotiations to address concerns about market distortion and unfair competition. German Chancellor Olaf Scholz’s upcoming trip to China presents an opportunity to discuss China’s subsidies and their impact on global markets.

Evolution of BYD:

Originally a battery maker, BYD made significant investments in EV and plug-in hybrid technology, capitalizing on China’s booming domestic EV market. BYD’s ability to offer competitively priced EVs, such as the Seagull hatchback, has contributed to its success and market expansion.