Capitalism and free markets failed to deliver, lots of cope around that mental model. If it was superior, it would’ve succeeded. China is 1/3rd of global manufacturing capacity, and it shows. Play to win.
It was the market that delivered BYD and Xiaomi. The government did his part with industrial policy and inviting Tesla to China to help start the ecosystem, but the brutal competition between Chinese auto makers following the rules of capitalism and free-market made those who survive the ones that can compete with other global companies. Before that they just subsidised and all they got were regional "champions" that siphoned out the funds and created shitty products no one wanted.
After Tesla came with special laws allowing it to work without Chinese co-ownership, but with a mandate to source from Chinese suppliers, this created the ecosystem needed for the next iteration, by the capitalist urge of Elon to get into the market and by free-market economy of suppliers to Tesla that are up to the standards to supply it.
The government set up the battlefield, and let the free-maket filter the strongest to survive.
In the Western countries the government and regulations are frequently the bane of the car companies. Good luck opening a mine or a battery factory in Germany, regulation, unions, green mandates, 36 hr. week. You can't fight with 1 leg tied.
This narrative overweights free market competition in China and any influence Tesla or Musk might have had versus the $230B in subsides provided to the Chinese EV industry over 14 years (2009-2023), with over ~$1.5B provided to CATL alone (although Tesla did receive ~$17B in total government subsidies in the US). Tesla did not begin production in China until October 2019.
If there’s any hero story here, its the will of the CCP to provide this level of support and subsidy to the Chinese battery and EV industries as part of their five year plans. This is why China can build ~20M EVs per year, Europe ~4.6M, and the US can build ~2-3M.
I understand this deeply challenges the ideas and belief systems around the cult of personality of risk taking entrepreneurs and entrepreneurship being something more than a series of successful calculated risks and bets.
> When it comes to China’s electric vehicles (EV) industry, its market has expanded exponentially compared to other markets. Now, a new study by the Center for Strategic and International Studies (CSIS) has revealed that China’s EV industry received at least $230.8 billion in government support between 2009 and 2023.
> As a result, this major investment has played a pivotal role in China’s rapid progress to become the world’s largest EV market, with sales anticipated to reach 10 million units in 2024.
Yes, there was investment, but investment without free markets and capitalism doesn't work usually for end products like cars. It's not a linear function of the capital invested, it's not possible to spend your way into good consumer products. That's not infrastructure. That's why I was mentioning that before Tesla came that investment didn't lead to any strong EV automotive players. In 2016 there was a big scandal on widespread EV fraud, where manufacturers just built to get the subsidy(骗补).
The policy shift came around 2017 when the government understood that subsidies and closed market created lazy automakers (e.g. check the US market for the same dynamic in trucks). In 2018 they removed subsidies for cars less than 150km of range and changed the requirements to receive them tying them to battery density.
After Tesla came and subsidies were reduced, most of the inefficient companies went bankrupt. It was the free-market competition that killed them. The reason why it changes was the competition not the subsidy. The subsidy was somewhat important, but as many of us knows, nothing government run produces good consumer products, you need market and free choice to get productivity. So it was the free-market and subsidy cutting that created the BYD, Li Auto, Xpeng and Nio. That's the proof that without free market it's impossible to have strong companies. And without subsidies you can have strong companies, even if it takes more time.
In EU and USA subsidies didn't create a lot (Northvolt?), because there were not enough free-market driven demand and too much regulation to jumpstart the free-market forces that will start the engine of innovation.
So the answer is not "capitalism and free-market doesn't work and governmental industrial policy is the answer", but it's the market that creates the strong companies. You can speed it up with venture/government capital, but without the brutal competition in the marketplace where people vote with their wallets you won't make it work.
