London Daily

Focus on the big picture.
Friday, Oct 24, 2025

China races to build its own Tesla as economy slows and subsidies dry up

China races to build its own Tesla as economy slows and subsidies dry up

About a decade ago, Wan Gang, a former Audi engineer in Germany, convinced the Chinese government to roll out a national strategy to develop new energy vehicles and spend billions of dollars.

As a result, the country became the largest consumer of electric vehicles in the world and a leader in battery technology.

But China’s electric car companies are now struggling as economic growth slows and subsidies are phased out.

When an idea strikes a chord with national ambition in China, the result can be millions of dollars wasted and a handful of start-ups struggling to survive in a cooling economy.

In the last few years, venture capitalists rushed to pour billions of dollars into the emerging electric vehicle industry backed by the Chinese government.

So far, it’s less clear how that bet has paid off. Take a look at the recent headlines:

Shares of U.S.-listed Nio, arguably China’s closest competitor with Tesla, are down more than 50% this year to about $2.70 each.
In November, Alibaba-backed XPeng tapped its own Chairman and CEO He Xiaopeng for a $400 million investment round, in which electronics company Xiaomi participated as a strategic investor.

Shenzhen-based BYD, which counts Warren Buffett as an investor, said in late October that net profits, ex-items, fell 130.1% in the third quarter. The Hong Kong-listed shares are down 25% for the year so far.

These are some of the handful of survivors from Beijing’s efforts over the last decade to accelerate the creation of China’s own electric car.

Now, Chinese auto sales are in a slump, consumer subsidies for new energy vehicles are phasing out next year and economic growth is slowing.

Start-ups didn’t expect the subsidies to last this long, said Rupert Mitchell, chief strategy officer at Chinese electric car company WM Motor, founded in 2015 by a former Volvo and Geely executive.

“What was not in the business plans was that China would have its first fully blown automotive downturn in Chinese history,” he told CNBC in late November.


How it all started

Wan Gang was an engineer for Audi in Germany before he returned to China in the early 2000s. Within 10 years, he became China’s minister of Science and Technology, despite not being a member of the Chinese Communist Party.

Wan convinced the central government to roll out a national strategy for developing new energy vehicles and battery technology. Beijing was eager to jump at an opportunity to become a global leader in an emerging technology, which conveniently tied into efforts to combat pollution.

As a result, the central government spent at least 33.4 billion yuan in subsidies between 2009 and 2015, according to the Ministry of Finance.

At the height of the subsidy-driven boom, the number of new energy vehicles sold in 2014 more than quadrupled from the year before, and multiplied by more than four times in 2015 to more than 330,000 vehicles, according to data from China Automotive Industry Association accessed through Wind Information.

In 2016, the Ministry of Finance said it found at least five companies cheated the system of over 1 billion yuan. That year, new energy vehicle sales grew just 53%, data showed.

High levels of subsidy misuse are not uncommon in China.

Between 2001 and 2011, about half of Chinese companies receiving direct grant subsidies for research and development were non-compliant, using the funds for other things such as private consumption and investments with higher returns. That’s according to a forthcoming working paper from Philipp Boeing and Bettina Peters, both researchers at the ZEW – Leibniz Centre for European Economic Research. The study did not cover consumer subsidies.

The research did indicate that misuse of funds declined with time and that the actual effectiveness in Chinese government policy in spurring research and development, if monitored, increased and non-compliance was wiped out, Boeing said in an interview.

But he noted there is little impact on productivity in the long term, which is a core problem for China’s economy.


Path to profitability

Some young companies that rode on China’s electric vehicle boom, however, are still confident in growth.

XPeng aims to reach breakeven in about two years, with the expectation the company is able to put about 150,000 vehicles on the road, Brian Gu, president and vice chairman of XPeng, said in an interview in late November. That’s about 10 times what the company has sold since it began deliveries last December for its first commercially available vehicle.

WM Motor’s Mitchell expects the company can break-even in the next 12 months, as the start-up puts greater effort into consumer marketing. The company is in the process of raising $1 billion, which he said would “fully finance” the automaker until a public offering.

Other companies are just starting to bring new electric vehicles to the market.

Aiways, a Shanghai-based start-up that touts its certification to sell to the European Union, announced in December it will begin deliveries of its U5 SUV. Guangzhou-based GAC Nio - a joint venture between the traditional automaker and the start-up - is set to reveal its first all-electric SUV under the Hycan brand on Friday.

Nio wasn’t available for comment ahead of the company’s annual product launch event on Saturday.

Meanwhile, the first “Made in China” Teslas are set to hit the market early next year at a lower price that vies with Nio.

“Looking at the last 10 years of Chinese government subsidies, we think their effect is more positive than negative,” said He Hui, senior researcher on China’s new energy policy at The International Council on Clean Transportation.

“We can’t say our new energy vehicles are number one,” she said. “But our batteries are.”

Newsletter

Related Articles

0:00
0:00
Close
Microsoft AI CEO: ‘We’re making an AI that you can trust your kids to use’ — but can Microsoft rebuild its own trust before fixing the industry’s?
China and Russia Deploy Seductive Espionage Networks to Infiltrate U.S. Tech Sector
Apple’s ‘iPhone Air’ Collapses After One Month — Another Major Misstep for the Tech Giant
Graham Potter Begins New Chapter as Sweden Head Coach on Short-Term Deal
Ecuadorian President Daniel Noboa Alleges Poison Plot via Chocolate and Jam
Lakestar to Halt External Fundraising as Investor in Revolut and Spotify
U.S. Innovation Ranking Under Scrutiny as China Leads Output Outputs but Ranks 10th
Three Men Arrested in London on Suspicion of Spying for Russia
Porsche Reverses EV Strategy as New CEO Bets on Petrol and Hybrids
Singapore’s Prime Minister Warns of ‘Messy’ Transition to Post-American Global Order
Andreessen Horowitz Sets Sights on Ten-Billion-Dollar Fund for Tech Surge
US Administration Under President Donald Trump Reportedly Lifts Ban on Ukraine’s Use of Storm Shadow Missiles Against Russia
‘Frightening’ First Night in Prison for Sarkozy: Inmates Riot and Shout ‘Little Nicolas’
White House Announces No Imminent Summit Between Trump and Putin
US and Qatar Warn EU of Trade and Energy Risks from Tough Climate Regulation
Apple Challenges EU Digital Markets Act Crackdown in Landmark Court Battle
Nicolas Sarkozy begins five-year prison term at La Santé in Paris
Japan stocks surge to record as Sanae Takaichi becomes Prime Minister
This Is How the 'Heist of the Century' Was Carried Out at the Louvre in Seven Minutes: France Humiliated as Crown with 2,000 Diamonds Vanishes
China Warns UK of ‘Consequences’ After Delay to London Embassy Approval
France’s Wealthy Shift Billions to Luxembourg and Switzerland Amid Tax and Political Turmoil
"Sniper Position": Observation Post Targeting 'Air Force One' Found Before Trump’s Arrival in Florida
Shouting Match at the White House: 'Trump Cursed, Threw Maps, and Told Zelensky – "Putin Will Destroy You"'
Windows’ Own ‘Siri’ Has Arrived: You Can Now Talk to Your Computer
Thailand and Singapore Investigate Cambodian-Based Prince Group as U.S. and U.K. Sanctions Unfold
‘No Kings’ Protests Inflate Numbers — But History Shows Nations Collapse Without Strong Executive Power
Chinese Tech Giants Halt Stablecoin Launches After Beijing’s Regulatory Intervention
Manhattan Jury Holds BNP Paribas Liable for Enabling Sudanese Government Abuses
Trump Orders Immediate Release of Former Congressman George Santos After Commuting Prison Sentence
S&P Downgrades France’s Credit Rating, Citing Soaring Debt and Political Instability
Ofcom Rules BBC’s Gaza Documentary ‘Materially Misleading’ Over Narrator’s Hamas Ties
Diane Keaton’s Cause of Death Revealed as Pneumonia, Family Confirms
Former Lostprophets Frontman Ian Watkins Stabbed to Death in British Prison
"The Tsunami Is Coming, and It’s Massive": The World’s Richest Man Unveils a New AI Vision
Outsider, Heroine, Trailblazer: Diane Keaton Was Always a Little Strange — and Forever One of a Kind
Dramatic Development in the Death of 'Mango' Founder: Billionaire's Son Suspected of Murder
Two Years of Darkness: The Harrowing Testimonies of Israeli Hostages Emerging From Gaza Captivity
EU Moves to Use Frozen Russian Assets to Buy U.S. Weapons for Ukraine
Europe Emerges as the Biggest Casualty in U.S.-China Rare Earth Rivalry
HSBC Confronts Strategic Crossroads as NAB Seeks Only Retail Arm in Australia Exit
U.S. Chamber Sues Trump Over $100,000 H-1B Visa Fee
Shenzhen Expo Spotlights China’s Quantum Step in Semiconductor Self-Reliance
China Accelerates to the Forefront in Global Nuclear Fusion Race
Yachts, Private Jets, and a Picasso Painting: Exposed as 'One of the Largest Frauds in History'
Australia’s Wedgetail Spies Aid NATO Response as Russian MiGs Breach Estonian Airspace
McGowan Urges Chalmers to Cut Spending Over Tax Hike to Close $20 Billion Budget Gap
Victoria Orders Review of Transgender Prison Placement Amid Safety Concerns for Female Inmates
U.S. Treasury Mobilises New $20 Billion Debt Facility to Stabilise Argentina
French Business Leaders Decry Budget as Macron’s Pro-Enterprise Promise Undermined
Trump Claims Modi Pledged India Would End Russian Oil Imports Amid U.S. Tariff Pressure
×