The Chinese government has implemented two policies aimed at stabilizing the domestic electric vehicle market, focusing on rectifying unhealthy competition and controlling key battery technology exports.
The State Council meeting on July 16, chaired by Premier Li Keqiang, emphasized preventing excessive competition, while the Ministry of Commerce applied new regulations limiting the export of critical electric vehicle battery technologies to protect China's global leadership in this field.
- China commits to curbing irrational competition and promoting innovation in the electric vehicle industry.
- The Ministry of Commerce controls the export of eight important battery technologies to maintain competitive advantage.
- Chinese companies like BYD are using lithium iron phosphate battery technology to reduce costs and increase safety.
How is China Adjusting Policies to Stabilize the Electric Vehicle Market?
At the State Council meeting on July 16, 2024, Premier Li Keqiang emphasized ending unhealthy competition in the electric vehicle industry with the participation of top experts. The government pledged to strengthen price monitoring, encourage innovation focus, and improve product quality instead of pursuing deep price cuts.
Speaking at the meeting, Li Keqiang stated:
"Irrational competition not only destabilizes the market but also causes long-term damage to China's electric vehicle industry."
Premier Li Keqiang, July 16, 2024, China State Council
This stems from concerns that rapid price reductions would slow sustainable development while China maintains its 5% electric vehicle industry growth target for 2025.
How is the Chinese Ministry of Commerce Implementing Battery Technology Export Controls?
On July 15, 2024, the Chinese Ministry of Commerce announced requiring government permits for exporting eight critical battery production technologies, in all forms of commercial or technical cooperation, to protect leadership in electric vehicle battery technologies.
Battery technology experts noted: "This measure helps prevent Chinese companies from losing competitive advantages when establishing production facilities abroad."
Important advancements in the past 5 years have helped China reduce costs and expand the operational range of lithium-ion batteries based on iron and phosphate compounds, replacing expensive and less safe nickel, cobalt, and manganese batteries.
Specific Example of Lithium Iron Phosphate Battery Technology in China
BYD in Shenzhen, the world's largest electric vehicle company, introduced lithium iron phosphate battery technology five years ago, successfully replacing expensive nickel-cobalt-manganese batteries with cheaper, safer materials that reduce fire risks.
CATL (Contemporary Amperex Technology Co. Limited) in Ningde quickly adopted this model. Meanwhile, products from South Korea, Germany, Japan, and the United States still primarily rely on traditional NCM batteries with higher costs.
Impact of New Policies on International Markets and Global Competition
Beyond domestic benefits, China's new export regulations significantly affect US and EU markets, which have previously been concerned that the surge of cheap Chinese electric vehicles could weaken domestic manufacturing.
"Controlling battery technology exports is a wise move that helps China protect a key industry and create long-term competitive leverage in international markets."
Electric Vehicle Industry Expert, China Industrial Dynamics Research Institute, 2024
The United States is currently considering approving the construction of two Chinese battery plants in Michigan, marking a step in economic cooperation while remaining cautious about technological security risks.
Frequently Asked Questions
- How does the Chinese government handle unhealthy competition in the electric vehicle industry?
- China increases price monitoring, prohibits deep discounts, and requires businesses to focus on improving technology and product quality, according to the State Council declaration in July 2024.
- Why is the Chinese Ministry of Commerce restricting electric vehicle battery technology exports?
- To protect global leadership in battery technology and prevent technology leakage abroad through export, investment, or technical cooperation.
- What are the outstanding advantages of lithium iron phosphate battery technology?
- Lithium iron phosphate batteries are safer, lower cost compared to nickel-cobalt-manganese batteries, helping reduce electric vehicle prices and minimize fire risks.
- How do the new policies affect the international electric vehicle market?
- The policies help slow down rapid expansion, protect domestic manufacturing, and increase competitive pressure on international manufacturers like the US and EU.
- What role does BYD play in the global electric vehicle industry?
- BYD is the world's largest electric vehicle manufacturer, surpassing Tesla in European sales and pioneering lithium iron phosphate battery technology in China.
