by Xinhua writer Liu Bowei

BEIJING, Feb. 12 (Xinhua) -- A narrative increasingly heard in the United States and Europe attributes China's rise as the global leader in new energy vehicles (NEVs) to government subsidies.

However, if this were the case, then by the end of 2022, when China's subsidies for NEV purchases have phased out, the industry should have stalled. Yet, the sector continued to grow and remained globally competitive.

In 2025 alone, official data showed that China's NEV production and sales surged, reaching 16.626 million and 16.49 million units, respectively, marking year-on-year increases of 29 percent and 28.2 percent, and maintaining China's top position in the world for 11 consecutive years.

So what are the drivers of China's NEV boom?

INNOVATION FUELS GROWTH

Early policy support, including subsidies, indeed helped the NEV industry get off the ground in China, providing funding and stability when the market was still nascent. More importantly, such a forward-looking strategy to nurture a strategic sector and foster long-term innovation has encouraged manufacturers to invest in core technologies early and sustainably.

Take NEV manufacturer BYD. The company has consistently prioritized long-term innovation over immediate profit, with R&D expenditure surpassing net income in 13 of the 14 years between 2011 and 2024.

In 2025, it unveiled the Super E-Platform, designed to enable ultra-fast charging, potentially providing a 400-kilometer driving range with a five-minute charge. That same year, BYD surpassed Tesla in global electric vehicle (EV) sales.

Meanwhile, China's CATL, a global leader in battery production, announced that its all-solid-state battery research and development had entered the pre-mass production stage, featuring an energy density more than 30 percent higher than traditional liquid lithium batteries and a lifecycle exceeding 2,000 charges.

According to an analysis released by SNE Research earlier in February, the global market for electric vehicle batteries grew by 31.7 percent last year, with CATL, the leading supplier, growing its market share from 38.0 percent in 2024 to 39.2 percent in 2025.

MORE AFFORDABLE AND BETTER

Sustained innovation has also driven steady reductions in production costs. Data from the International Energy Agency indicated that in 2024, battery pack prices in China fell nearly 30 percent, far faster than the 10 to 15 percent declines seen in Europe and the United States.

The faster decline in battery costs has strengthened the competitive edge of Chinese EVs, as batteries make up roughly 30 to 40 percent of an EV's total cost.

A more affordable price is only part of the picture. While traditional automakers often take around four years to bring a new model to market, Chinese NEV makers roll out new features and model updates at a pace akin to consumer electronics, typically in just over a year, with some companies introducing multiple updates within a single year.

Early subsidies may help an industry take off, but sustained innovation and efficiency ultimately determine the winners. Just as Italian entrepreneur Andrea Levy, the president of the 2025 Turin Auto Show, has observed, China's combination of advanced battery and charging technologies, plus attractive pricing, gives Chinese automakers significant potential.

INDUSTRIAL CLUSTERING

China's NEV industry has also benefited from the robust industrial foundation built over more than 40 years of China's reform and opening-up policy. This well-established base has fostered a highly integrated and tightly clustered ecosystem, spanning raw material processing, battery production, vehicle assembly and software development, which has helped the sector thrive.

This deeply integrated network enables highly efficient, reliable production and continues to underpin the sector's rapid growth.

The Yangtze River Delta, for instance, has established a "4-hour industrial ecosystem," where any NEV plant can obtain all required parts within a four-hour drive, facilitating efficient collaboration and rapid iteration.

In this collaborative industrial network, Shanghai serves as the technological hub, driving advancements in chips and software development. Meanwhile, Changzhou, located about 200 km west of Shanghai in Jiangsu Province, dominates power battery production, the essential "core" of EVs. To the south, Ningbo in Zhejiang Province plays a key role in manufacturing the "structure" of the vehicles, particularly through the use of cutting-edge integrated die-casting technology.

Changzhou, often referred to as the "Capital of New Energy," exemplifies the strength of this industrial clustering. In 2025, the production value of its NEV and auto parts cluster exceeded 500 billion yuan (about 70.4 billion U.S. dollars), while the production of NEVs surpassed 800,000 units. This growth highlights the remarkable efficiency and synergy of the broader industrial network.

POWERING NEXT-GEN VEHICLES

China's NEV sector is characterized by a vertically integrated value chain spanning research and development, manufacturing, sales, after-sales service and standard-setting. But it is not just the vehicles themselves that are advancing at a rapid pace; China is also leading the way in the key subsystems that power them.

At the 2025 IAA Mobility, one of the world's largest auto shows, over 100 Chinese automakers and suppliers showcased the latest in NEV technology. Among the highlights was Horizon Robotics, a Chinese AI chipmaker, which unveiled its Journey 6 series, a smart-driving platform that supports functions ranging from basic assistance to citywide autonomous driving.

The influence of Chinese technology in NEV subsystems didn't stop there. Several European automakers incorporated Chinese innovation into their own models, marking a significant shift in how Chinese companies export technology.

Rather than just selling individual components, China is now exporting entire "ecosystems" that span the NEV industry. For example, BMW's Neue Klasse iX3, developed in partnership with Chinese firms, comes equipped with systems optimized for local digital ecosystems.

A report by Germany's Center of Automotive Management in 2025 named five Chinese companies among the world's top 10 most innovative automakers, citing their leadership in EVs, autonomous driving, and in-car electronics.

Chinese companies are strong in digitalization and intelligent technologies, helping cars become more comfortable and smarter, said Ferdinand Dudenhoeffer, a prominent German automotive expert and director of the Center for Automotive Research in Bochum, Germany.

"The car of the future will be completely different -- it will be modern, digital, and intelligent," Dudenhoeffer said. "We can learn from China's innovations, bring more innovative products to the market, and also benefit from China's cost advantages and long-term planning."