New Energy | The “New Three” of China Sweep the World: What is the Miracle? Can They Withstand the Trade War?
For the past two decades, the world has witnessed China’s remarkable achievements in the industries of photovoltaic manufacturing, new energy vehicles, and power batteries. However, the wave of trade protectionism has brought new and severe challenges. In just one generation, China has risen to become the world’s leading manufacturing powerhouse. In 2000, China’s manufacturing value added accounted for only 6% of the global total, but by 2023, it had surged to 30%. This achievement has only been accomplished by four countries since the Industrial Revolution: the United Kingdom in the late 19th century, the United States in the 20th century, Japan in the late 20th century, and now China.
In the early years of this century, China was referred to as the “world’s factory,” predominantly acting as a processing hub where technology, equipment, and markets lay overseas, with only the lowest profit-making assembly processes occurring domestically. For instance, an iPhone made in China has an export value of $200, of which only $7 is earned from assembly in China. By 2015, China had already become the world’s largest manufacturing country by output value, yet it still struggled with the perception of being large but not strong. That year, the Chinese government introduced the Made in China 2025 initiative, aimed at transforming the country’s manufacturing sector from large to strong.
As of early 2025, mainstream Western media like The Economist concluded with mixed emotions that the Chinese government had largely achieved its goals. China’s manufacturing sector is now not only vast but also holds technological advantages in several critical industries. The most frequently mentioned sectors include the “new three” – photovoltaic power generation equipment, lithium-ion power batteries, and new energy vehicles. These sectors are emerging industries that many countries are vying to dominate. By 2024, China’s production of new energy vehicles will account for over 70% of global production, while its output of power batteries and photovoltaic modules will approach 80%.
The “old three” refers to clothing, furniture, and home appliances, which have traditionally been the mainstays of Chinese exports and the foundation of its manufacturing sector. The “new three” not only represent new growth points for Chinese exports but also serve as a new calling card for Chinese manufacturing. Similar to the “old three,” most of the “new three” are led by private enterprises.
When reviewing the development of the “new three,” we can see that they share common traits with the recent Chinese manufacturing advantages in high-speed rail, drones, display panels, and 5G telecom equipment. However, the original technologies that brought the “new three” from 0 to 1 did not originate in China. Photovoltaics emerged from the Bell Labs in the United States, lithium batteries were invented by American scientist John B. Goodenough, the 2019 Nobel Prize winner in Chemistry, and the pioneers in electric vehicles were initially Japanese companies. Nevertheless, it was in China that large-scale, low-cost lean manufacturing was realized, marking a recurring story.
The uniqueness of the “new three” lies in their connection to the energy transition, which is driven by the global emphasis on climate change. In 2016, the Chinese government signed the Paris Agreement, and in 2020, it made a dual carbon commitment (aiming for peak carbon emissions by 2030 and carbon neutrality by 2060), which has had an immeasurable impact on accelerating related industries. However, attributing the rise of the “new three” solely to industrial policy would be misleading. A closer examination of their development reveals that while industrial policy is crucial during the initial stages, true differentiation comes from technological innovation. This innovation relies on China’s large pool of engineers, a complete industrial chain, an enormous domestic market, and entrepreneurial spirit. It is challenging to find another country that combines all these factors.
Whether the “new three” can maintain their leading position depends on these factors, but future variables are evidently greater. The Trump administration has disrupted the global political and economic order, and the previously favorable free trade environment for Chinese manufacturing no longer exists. Beyond the United States, more countries are implementing trade barriers for various reasons, including geopolitical considerations, industrial security, domestic employment, and national competitiveness. However, going global is an unavoidable test for the “new three” because the domestic market cannot absorb their vast production capacity.
In 2024, exports of electric vehicles are expected to grow by 13%, while exports of photovoltaic modules and power batteries will decline for the first time in years, with a nearly 30% drop for the former and a slight 5% decrease for the latter. In the long run, photovoltaic and battery technologies have more apparent advantages in their industrial chains, providing them with more confidence in face of challenges. The challenges for new energy vehicles are considerably larger, as the global automotive market is nearly stagnant, and the automotive industry is a cornerstone in developed countries like the United States, Europe, and Japan. To succeed in this zero-sum game, more wisdom and courage will be required.
Photovoltaics: Leading the Entire Industry Chain
“Today, our big party will be hard to surpass in the next three to four years,” said Zhong Baoshan, chairman of Longi Green Energy, on May 23, 2023, shocking the audience. The Shanghai Solar Photovoltaic Exhibition (SNEC) held in May each year is the largest event in China’s photovoltaic industry. The scale of the 2023 exhibition was unprecedented, with over 3,100 exhibiting companies and more than 500,000 registered visitors. The venue was bustling, with network congestion, making it difficult to send a WeChat message without walking a long distance.
Zhong’s alarming statement came during a green energy leadership dialogue coinciding with the photovoltaic exhibition. He pointed out that “we built 380GW (gigawatts) in the past 18 years, and in the last 18 months alone, we have built over 380GW. This will inevitably lead to an imbalance between supply and demand, posing a huge challenge for everyone present. Some may not be able to return to this party.” In the second half of 2023, the photovoltaic industry faced a sharp downturn, with component prices plummeting from 2 yuan/watt to as low as 0.5 yuan/watt. The top six photovoltaic companies by revenue in 2023 are expected to collectively report losses exceeding 30 billion yuan, with only JinkoSolar achieving a slight profit.
The photovoltaic manufacturing sector is the strongest among the “new three.” In 2023, Chinese companies accounted for over 98% of global production in silicon wafers, while their share was 84.6% for modules. China is also the largest market for photovoltaic power plants, with recent installation volumes exceeding half of the global annual increase. Initially reliant on imported raw materials, equipment, and markets, China has gradually developed a fully autonomous and controllable supply chain, becoming both a reflection of China’s manufacturing achievements and its challenges.
Globally, the early development of the photovoltaic industry benefited from the concerns over oil crises and energy security in countries like the United States and Japan in the 1970s, as well as the green development aspirations of countries in Europe, particularly Germany. The technology, industry, and market were first established in these countries. Around 2000, China’s photovoltaic industry began to take its first steps. In 1997, High Ji Fan founded Trina Solar. In 2001, Suntech Power and Canadian Solar were established. In 2005, JA Solar was founded, followed by JinkoSolar in 2006. The year 2008 marked a pivotal moment for the Chinese photovoltaic industry when Longi’s founder, Li Zhenguo, made a significant decision to divest unrelated businesses and focus solely on monocrystalline silicon photovoltaic production. At that time, Longi was still an obscure company, overshadowed by its client, Shangde, founded by Dr. Shi Zhengrong.
Shangde’s emergence drove the entire photovoltaic industry ecosystem, including equipment, raw materials, glass, and backsheets. In 2009, the Chinese government initiated the “Golden Sun Project,” providing subsidies for solar energy construction. After 2010, the impact of the financial crisis gradually faded, and overseas markets began to recover. Changes in the domestic and international market environment ushered in a rapid development period for Chinese photovoltaic companies. By 2013, Chinese photovoltaic companies held over 60% of the global market share in module production but still relied heavily on imports for raw materials and production equipment.
In 2012, the German company SolarWorld, dissatisfied with China’s low-priced competition, led other companies in initiating anti-dumping and anti-subsidy investigations against Chinese photovoltaic products in the United States and Europe. At that time, the American market had little impact, but the European investigations significantly affected domestic operations, leading many photovoltaic companies to nearly halt their businesses. However, Li Zhenguo stated in an interview that technological breakthroughs often occur during difficult times for the industry, and changes in polysilicon and silicon wafer technologies took place precisely after the double investigations in 2012.
On May 23, 2013, representatives from 40 photovoltaic companies, including Yingli, Trina, and Canadian Solar, held a press conference in Beijing to firmly oppose the EU’s anti-dumping tariffs on Chinese photovoltaic products. Li Zhenguo did not attend, as he was busy collaborating with equipment manufacturers on technological advancements in monocrystalline silicon production. At that time, polycrystalline silicon was the mainstream technology in the photovoltaic industry, accounting for over 90% of global silicon wafer market share.
In August 2013, domestic policies underwent key adjustments, and China entered the era of benchmark electricity prices. Instead of subsidies based on installed capacity, the core difference in the benchmark electricity pricing policy was to implement subsidies based on actual electricity generation. This policy truly opened up the Chinese photovoltaic market. Subsequently, the primary source of newly added photovoltaic plants shifted from Europe to China, a trend that has persisted to this day, even after subsidy policies declined.
Policy support allowed the downstream market for photovoltaics to grow domestically, while technological self-innovation enabled Chinese companies to gradually gain control over upstream production equipment and materials. At this time, polycrystalline silicon remained the absolute market leader, but Li Zhenguo firmly believed that monocrystalline silicon would ultimately replace polycrystalline silicon. Monocrystalline silicon wafers have fewer impurities and more uniform quality, leading to higher photoelectric conversion efficiency, meaning that photovoltaic power plants can generate more electricity and revenue on the same land area. However, traditional slurry-based cutting techniques resulted in significant losses and low efficiency, causing cutting costs to remain high.
The key process for producing monocrystalline silicon wafers, the diamond wire cutting technology, was monopolized by Japanese and Swiss companies at the time. Zhong Baoshan attempted to collaborate with Japanese suppliers of diamond wire, but failed. This led Longi to take a gamble and invest in the research and development of diamond wire cutting technology. Zhong instructed the R&D team that a strategic loss of 40 million yuan within a specific timeframe was acceptable. Just six months later, the technology achieved a break-even point. In 2013, Longi successively broke through production technologies for monocrystalline silicon wafers, reducing their prices to be comparable with polycrystalline wafers. By September 2015, Longi had replaced all cutting processes on its production lines from saw blade cutting to diamond wire cutting. Subsequently, diamond wire cutting technology began to spread across the industry.
In 2005, the cost of cutting a silicon wafer was five to six yuan, but by 2020, it had dropped to 0.3 yuan. The market share of monocrystalline silicon wafers increased from 5% in 2014 to 15% in 2015, and by 2019, it reached 65%, surpassing polycrystalline for the first time. By the end of 2021, the market share of monocrystalline silicon wafers soared to 94.5%, making Longi the biggest winner and a leading player in the industry.
The upstream silicon material had previously been heavily reliant on imports, posing a significant pain point for China’s photovoltaic industry. During the 2012 EU double investigations, silicon material prices plummeted, leading to the bankruptcy of many photovoltaic companies, including leading firms like Shangde. In 2013, GCL surpassed Germany’s Wacker to become the world’s largest supplier of silicon materials, and by 2021, it was overtaken by Tongwei.
Policy adjustments continue to encourage new technological applications. Beyond the benchmark electricity pricing policy, the “Leader Plan” was released in 2015, which quickly gained market acceptance for photovoltaic products with higher efficiency. Technological advancements and the rapid growth of China’s photovoltaic market have driven down the prices of photovoltaic modules faster than the pace of subsidy policy adjustments. Then came the unexpected “531 New Policy.” On May 31, 2018, the National Development and Reform Commission, Ministry of Finance, and National Energy Administration released a notification reducing the scale of ordinary photovoltaic power plant construction for that year to just 1,000 kilowatts, further lowering benchmark electricity prices.
Industry veterans recall that “one week we were at the Shanghai Photovoltaic Exhibition, and everyone was in high spirits; the next week, the ‘531’ policy was announced, and the industry came to a standstill.” However, just two years later, in September 2020, China made its dual carbon commitment, and the top-down policy influence allowed the photovoltaic and other new energy industries to truly usher in a phase of rapid development. By 2021, China’s photovoltaic industry had achieved the conditions to end reliance on subsidies and achieve grid parity through cost reduction and efficiency improvement.
The National Development and Reform Commission announced that starting from August 1 of that year, newly built photovoltaic projects would no longer receive central government subsidies, entering a phase of complete market-oriented development. In the following years, multiple Chinese photovoltaic companies, leveraging their higher conversion efficiencies and lower costs, evolved into vertically integrated giants across the entire industry chain. During this period, leading photovoltaic manufacturers in Japan and Europe gradually fell behind, with Japan’s Sharp, once the first to commercialize solar cells and a former leader with a 28% global market share, dropping out of the top ten global manufacturers by 2015 and subsequently downsizing its photovoltaic operations.
In Europe, Photowatt, once the fourth-largest photovoltaic manufacturer worldwide, declared bankruptcy in 2012 and incurred losses for over a decade before announcing its closure in early 2025. SolarWorld, the German company that initiated the double investigations, filed for bankruptcy in 2017. Wacker, once the global leader in silicon materials, has been pushed out of the top five by Chinese companies like Tongwei and GCL. Currently, only two non-Chinese companies have solar module production capacities exceeding 5GW: First Solar from the United States and Hanwha QCells from South Korea. Due to numerous trade barriers imposed by the United States, these companies, which lack advanced technology and cost advantages, dominate the American photovoltaic market.
As of 2024, the top ten solar module sales worldwide are all Chinese companies. The technological advancements in the photovoltaic industry continue unabated. The transition from PERC (Passivated Emitter and Rear Cell) technology to TOPCon (Tunnel Oxide Passivated Contact) technology has once again led to changes in industry leadership. In 2023, JinkoSolar, which fully shifted to TOPCon technology, surpassed Longi to become the industry leader. Riding the wave of market growth, government support, and capital influx, the rapid expansion of TOPCon technology has led to its overwhelming adoption, capturing a market share of 23% in 2023, which skyrocketed to 71.1% in 2024.
Longi’s breakthroughs in monocrystalline technology were achieved through joint research with equipment manufacturers, and JinkoSolar’s entry into TOPCon technology was also closely tied to collaborations with equipment suppliers. In the early years of China’s photovoltaic industry, production equipment had to be imported from Europe, Japan, and the United States, which was expensive and heavily reliant on others. However, by around 2018, domestic replacements had largely been realized. In 2018, Laplace chairman Lin Jiajian visited JinkoSolar to provide core equipment for the TOPCon production line. Through collaboration with manufacturers like Laplace, JinkoSolar established a 900MW production line in 2019 and continuously achieved breakthroughs in TOPCon battery efficiency and mass production.
On the flip side, much of the technology in photovoltaics is embedded in the equipment. New entrants can quickly establish production lines by acquiring mature equipment, hiring a few technicians, and securing funding. Equipment companies like Laplace and Jiejia Weichuang have integrated the production technology for TOPCon batteries and can provide comprehensive solutions from production line design to installation and training. The rapid dissemination of technology has turned TOPCon batteries into a red ocean, leading to a rapid expansion of photovoltaic capacity in China between 2022 and 2023, far exceeding the growth in demand for downstream photovoltaic power plants, resulting in a swift drop in prices across the entire industry chain.
Local governments, driven by the demand for industrial transformation and upgrades, have actively supported photovoltaic enterprises’ capacity expansion through various methods, such as resource exchanges, factory construction, equipment returns, price discounts, and different subsidies. This deep binding between photovoltaic companies and local governments has delayed the process of capacity clearance after the industry fell into serious overcapacity. Fierce competition has sparked patent wars among leading photovoltaic companies. Previously, the industry accepted an open-source approach to technology, collectively promoting development, but this has also buried the potential for overcapacity. Now, the consensus has shifted to creating patent barriers as a powerful weapon to protect oneself and weaken competitors.
Alongside patent wars, there has also been an escalation of debates among different technical routes, including TOPCon, HJT (Heterojunction Technology), and BC (Back Contact) batteries. Li Zhenguo from the BC camp stated in an interview that the second-generation BC product that Longi is developing will be mass-produced in the second half of 2025, with cost and yield issues already resolved. Meanwhile, the largest photovoltaic market in the world is undergoing new policy changes. In February 2025, the National Development and Reform Commission and the National Energy Administration released a notification, dubbed “Document 136,” which initiated a comprehensive transition to market-based pricing for new energy electricity. The reliance of photovoltaic generation on weather will be most directly impacted by this market-oriented pricing approach. Market-driven pricing is not aimed at destroying the industry but rather provides new price signals to guide expectations and investments. The photovoltaic industry will require time to adapt to the new environment.
Globally, China’s position in the photovoltaic industry is now unshakeable, and the initiative for technological change remains firmly in the hands of Chinese companies. Following this round of survival of the fittest, the truly outstanding Chinese photovoltaic enterprises will face an even broader and more complex market.
New Energy Vehicles: A Transformation in 2020
On March 6, 2025, GAC Toyota launched its new model, BZ3X, in Hangzhou. The combination of features reminiscent of a “sofa and TV,” an astonishing price, and over 10,000 orders within an hour of the launch left many impressed, as comedians poked fun at Toyota’s shortcomings in smart technology. The aggressive pricing, including laser radar and advanced driving assistance, surpassed that of many Chinese brands. This shift, where overseas giants are learning from Chinese automakers, can be attributed to the rapid development of new energy vehicles, with BYD acting as a representative of Chinese electric vehicle manufacturers.
In 2023, BYD sold 3.02 million cars, marking the first time a Chinese automaker entered the global top ten, ranking ninth. By 2024, with 4.27 million sales, BYD became the fifth-largest automaker globally, setting a new record. When Wang Chuanfu acquired Qinchuan Automobile in 2003 to enter the automotive industry, he shared his three-step strategy for BYD’s development with the future chief scientist, Lian Yubo. The first step was to focus on fuel vehicles, leveraging the rapid growth of China’s automotive market and gaining entry through price advantages. The second step involved balancing fuel and new energy vehicles, using profits from fuel vehicles to support R&D in new energy vehicles. Finally, the third step aimed for full electrification, relying on technological and scale advantages to establish core competitiveness.
Wang Chuanfu envisioned that by 2025, BYD would become the largest new energy vehicle manufacturer globally. The first BYD model, the F3, was launched in September 2005, and by 2007, sales surpassed 100,000 units. In 2009, BYD sold nearly 300,000 cars, becoming the sales champion in the Chinese automotive market for the first time, fulfilling the first step of its strategy. However, during the second stage of balancing fuel and new energy vehicles, BYD faced significant challenges. In 2008, it launched its first new energy vehicle, the F3DM, and the R&D investment for new energy vehicles increased, causing insufficient investment in fuel vehicle operations.
This led to a slow product line update, with only the F3 and S6 models dominating from 2009 to 2014, resulting in declining competitiveness. During the same period, total automotive sales in the Chinese market surged from 13 million to 23 million, while BYD’s sales fell from nearly 500,000 in 2009 to less than 400,000 in 2014. Although revenue increased, profits consistently declined, with net profits dropping below 100 million yuan in 2012, and net profit margins between 2012 and 2014 were only 0.17%, 1.05%, and 0.75%, respectively, with non-recurring net profits remaining negative for three consecutive years.
In December 2013, BYD officially launched its first model named “Qin,” named after historical Chinese dynasties. This vehicle used BYD’s second-generation DM (Dual Mode) hybrid technology, significantly outperforming contemporaneous fuel vehicles. Wang Chuanfu defined the launch of Qin as the beginning of BYD’s “second leap.” In 2014, BYD sold 21,000 new energy vehicles, capturing 28% of the national new energy vehicle market that year. Simultaneously, the Nissan Leaf won the title of global pure electric vehicle sales champion for four consecutive years, surpassing 100,000 cumulative sales.
During the initial stages, China’s new energy vehicles were largely synchronized with global development. The key difference was that policies primarily drove China’s new energy vehicle market. Prior to the “Ten Cities, Thousand Vehicles” policy launched in 2009, most new energy vehicles in China were handmade prototypes rather than mass-produced products. In October of that year, the world’s first mass-produced pure electric vehicle, the Nissan Leaf, was unveiled at the Tokyo Motor Show and went on sale in 2010. The “Ten Cities, Thousand Vehicles” initiative aimed to promote and demonstrate the operation of new energy vehicles, planning to develop 10 cities with 1,000 vehicles in each city within three years.
By the end of 2012, 25 cities had demonstrated a total of 27,400 vehicles, including 4,400 privately purchased vehicles. However, the implementation of the “Ten Cities, Thousand Vehicles” policy exposed issues such as local protectionism, immature battery technology, and inadequate charging infrastructure. In 2013, the Ministry of Finance, Ministry of Science and Technology, Ministry of Industry and Information Technology, and National Development and Reform Commission jointly issued a notification to continue promoting the application of new energy vehicles, specifying maximum subsidies of 60,000 yuan and 300,000 yuan for pure electric passenger vehicles and buses, respectively. This direct subsidy policy triggered an explosion in the domestic new energy vehicle market. In 2015, China’s new energy vehicle sales surpassed 300,000, becoming the world’s largest market, a status it has maintained since.
The rapid increase in sales led to rampant abuse of subsidy policies. During 2015 and 2016, numerous instances of “subsidy fraud” emerged, where manufacturers designed vehicles specifically to meet subsidy requirements rather than market demand, producing them to sell to affiliated parties, such as rental companies, to obtain subsidies. At that time, national and local subsidies exceeded the production costs of these “fraudulent” models, leading to numerous “electric vehicle graveyards” in manufacturing hubs like the Yangtze River Delta and Pearl River Delta, where hundreds and thousands of vehicles, most of which were fraudulent models, accumulated.
Subsequently, the Chinese government adjusted subsidy policies, gradually incorporating criteria such as range, vehicle energy consumption, and battery energy density into eligibility standards, raising the threshold for subsidies and lowering subsidy amounts while progressively limiting local subsidy力度 and establishing a timeline for subsidy reductions. However, the negative impacts of “subsidy fraud” extended beyond financial losses, with wasted abandoned vehicles and the poor reputation of shoddily made “fraudulent” models leaving a lasting impression on consumers and hindering the growth of serious manufacturers.
The most affected companies are those genuinely committed to quality. The period from 2009 to 2019 marked the peak of financial support for new energy vehicles in China, coinciding with a challenging phase for BYD. A long-time employee from BYD’s dealership, Xin Min Heng, recalled that before 2019, the main market for new energy vehicles was taxis and ride-hailing vehicles, which involved bulk procurement, leaving little opportunity for BYD. At that time, half of the subsidies came from the central government and half from local governments, often favoring local manufacturers over BYD in high-growth markets like Beijing and Shanghai.
From 2015 to 2019, despite being the world’s largest new energy vehicle market, China had yet to produce globally competitive products. Before 2020, Chinese new energy vehicles could not compete with Toyota in hybrid models, nor could they match Nissan in pure electric models or General Motors in plug-in hybrids, revealing significant quality and technological gaps. However, the pace of technological advancement in China’s new energy vehicles was underestimated globally. In 2015, Dong Yang, chairman of the China Automotive Power Battery Industry Innovation Alliance, remarked in an interview that while China’s new energy vehicles lagged at that time, they advanced a generation every two years, while international competitors took four to five years to do so. In ten years, China would leapfrog international standards.
2020 marked a turning point for China’s new energy vehicles. In 2019, government subsidies were drastically reduced, with the maximum national subsidy dropping from 45,000 yuan to 25,000 yuan and local subsidies entirely withdrawn. Overall subsidies decreased by over 70%. In 2019, sales of new energy vehicles in China dipped slightly, from 1.256 million to 1.206 million, but the decline was far less than expected. The sharp reduction in subsidies, especially the complete withdrawal of local subsidies, enabled competitive models to gain an advantage in the national market, laying the groundwork for their subsequent rise.
Despite the impact of the pandemic in 2020, the Chinese new energy vehicle market did not decline; instead, it experienced slight growth, with new energy vehicles capturing 5.4% of the overall automotive market for the first time. Dong Yang views 2020 as a pivotal year for the development of new energy vehicles in China, as production continued to rise despite a 75% drop in subsidies, with many manufacturers reporting positive gross margins for new energy vehicles without relying on subsidies. This indicates a transition to a market-driven phase in the new energy vehicle sector, where market forces take precedence over policy influences.
The rise of new energy vehicles also significantly boosted the market share of Chinese brands. Between 2020 and 2024, the market share of Chinese brands in the domestic market rose from 38.4% to 60.5%. Prior to 2019, while new energy vehicles were growing, the market share of Chinese brands had been declining slightly. A sales veteran with over ten years of experience in the automotive sector recalled that before 2019, selling new energy vehicles involved storytelling, while after 2020, sales teams were busy processing orders, leaving no time for narratives.
Wang Chuanfu often reflects on the challenges faced by BYD just before its rise. At the ceremony marking BYD’s 30th anniversary in 2024, he recounted, “In 2019, many long-time comrades left the company, especially key technical personnel who were poached by other manufacturers, with some companies even setting up recruitment booths right at BYD’s door to lure employees with high salaries and promising development prospects.” 2019 was indeed a precarious year for BYD. Sales had lingered around 400,000 units for several years, with revenue slightly increasing but insufficient profitability leading to low cash flow, which diminished BYD’s attractiveness to talent.
In 2020, BYD’s revenue surged by nearly 30 billion yuan, with net profit increasing by about 3 billion yuan and cash reserves rising by over 2 billion yuan, marking a significant turnaround. The introduction of the blade battery in March 2020 and the DM-i dual-mode hybrid technology in November 2020 provided the technological foundation for BYD’s rapid ascent in the subsequent years. From 2015 to 2020, BYD’s total employee count remained around 200,000, while average income increased from 64,200 yuan to 100,400 yuan. By 2020, BYD emerged from the doldrums, and by 2024, its employee count reached 968,000, with an average income exceeding 120,000 yuan, reflecting an 87.5% growth over ten years.
However, compared to the company’s revenue growth of 9.7 times and profit growth of 14.3 times during the same period, the increase in employee income lagged significantly. When discussing the rapid rise of new energy vehicles in China, industry experts and sales personnel alike emphasize the critical role played by Chinese consumers. The eager demand for new technologies and features among Chinese consumers has pushed companies to accelerate iterations, and their high tolerance for flaws and issues accompanying new technologies has allowed the new energy vehicle industry to weather its most challenging initial phases.
Outside China, no other market offers such a level of consumer tolerance. However, this tolerance can sometimes lead to complacency among manufacturers, resulting in excessive marketing operations, misleading technical parameters, compromised safety standards, and the immediate deletion of critical comments. This breakneck pace of development accrues debts that will eventually need to be repaid.
Initial subsidy policies are often viewed as a crucial factor behind the explosive growth of new energy vehicles in China. However, Gong Huiming, director of industrial transformation at the Energy Foundation, argues that while subsidy policies were vital in the early market, they might not have been the most critical factor. The current state of China’s new energy vehicles is the result of a confluence of various policies, such as restrictions on purchases and usage, the dual-credit policy, emission standards, and fuel consumption standards, all of which are equally important.
Gong notes that China established a medium- to long-term development plan for new energy vehicles as early as 2012, and in 2020, it set a development plan for 2035. The leading role of planning has been vital, especially when consensus had not yet formed in the early stages of the industry, ensuring continuity and enforcement of policies. He also points out that similar policy environments exist abroad, such as California’s early implementation of electric vehicle policies, but the market is relatively small and lacks a manufacturing base.
Globally, it is challenging to find a region that combines stable industrial policies, complete industrial chains, large consumer markets, and intense market competition like China. In such an environment, the speed of development in China’s new energy vehicle industry has exceeded expectations. In April 2023, the Shanghai Auto Show resumed post-pandemic, showcasing products from Chinese companies that astonished foreign automakers and suppliers. From the three core technologies of batteries, motors, and electronic controls to intelligent driving and smart cockpit technologies, as well as exceptional design philosophies and rapid responsiveness to consumer demands, the advantages of Chinese automakers in their domestic market have become increasingly unassailable.
However, the growth of China’s new energy vehicles is heavily dependent on the unique environment of the domestic market. In the global market, Chinese companies still face significant challenges. Dong Yang believes that Chinese automakers have become accustomed to rapid growth and excel at competition, which can lead to a path dependency. If they fall into this trap, they may narrow their options in the global competition. “As a follower, one can aim for a single target and pursue it relentlessly, but as a leader, one must leave room for oneself and for competitors; otherwise, when one day you drive your competitors to extinction, you will soon run out of options as well.”
Power Batteries: The Rise of Lithium Iron Phosphate
The lithium-ion battery industry, primarily focused on power batteries, is closely linked to the development of new energy vehicles, but its rise predates that of these vehicles. In 1995, the first lithium battery was born in the laboratory of the Chinese Academy of Sciences under the team led by Chen Liquan. At that time, Sony had already begun mass commercial use of lithium-ion batteries in electronic products, and American scientist John B. Goodenough had invented a stable and reliable positive electrode material, lithium iron phosphate. Goodenough was awarded the Nobel Prize in Chemistry in 2019 for his contributions.
In 2001, BYD entered the lithium battery sector. At that time, if BYD wanted to use a fully automated production line like Japanese battery companies, a single production line would cost millions. Wang Chuanfu and his engineers dismantled Japanese batteries to analyze each process, ultimately replicating an automated production line through the use of “special fixtures and manual assembly.” This “grassroots” approach initiated the industrialization process of batteries in China, despite the fact that core equipment and high-end materials were still heavily reliant on imports.
In late 2011, Dong Yang, chairman of the China Automotive Power Battery Industry Innovation Alliance, felt despair after visiting South Korean battery companies. He discovered that these companies had a complete technological layout and development roadmap, with various energy density levels of ternary lithium batteries, a clear technology path, and a large team dedicated to electrochemistry. By contrast, few Chinese universities had adequate electrochemistry laboratories, and it would take years to assemble a research team of thousands. However, the domestic battery industry did not wait for talent to emerge; instead, companies hired Korean and Japanese experts with high salaries while also recruiting graduates from fields like physics, chemistry, mathematics, and energy to cross over into the battery industry, learning and innovating on the job. Dong summarized, “It is the industry that produces talent, not talent that produces the industry; China’s fertile battery industry soil is key to nurturing talent.”
From 2013 to 2015, the new energy vehicle market, spurred by policy incentives, witnessed explosive growth, which in turn drove the rise of the core component: the power battery industry. During this period, commercial vehicles, primarily electric buses, were the main source of orders for battery companies. It was during this time that CATL began to emerge. Founded by Zeng Yuqun in December 2011, CATL is often referred to as the father of Chinese lithium batteries, Chen Liquan‘s doctoral student. CATL’s first major client was BMW Brilliance, and through collaborative development with BMW, CATL successfully secured this iconic client, becoming BMW’s first battery
