China’s EV Ambitions Spark local Government Bidding War, Raising Concerns of Overcapacity
BEIJING – A decades-long push by Beijing to dominate the electric vehicle (EV) market is fueling a fierce competition among local governments to attract manufacturers, resulting in significant land subsidies and aspiring production targets that analysts warn could lead to notable overcapacity and economic strain.
The initiative began in the 1990s, with policymakers aiming to position China at the forefront of the EV revolution. In 2009, Beijing launched a program offering billions of dollars in subsidies to incentivize automakers to produce EVs for consumers.
By 2017, despite the subsidies, widespread consumer demand for EVs hadn’t materialized. That same year, Chinese politicians outlined a plan to reach an annual vehicle production of 35 million units by 2025 – roughly double the record sales volume in the United States. This plan empowered local authorities to aggressively court EV manufacturers.
China neared this target in 2023, producing over 31 million vehicles, according to the China Association of Automobile Manufacturers (CAAM). This sparked a provincial race to secure production capacity.
In 2021, the Chanfen District of Anhui province successfully attracted automotive giant BYD by offering considerably discounted land. BYD acquired 8.3 square kilometers of land in Chanfen at a price 40% lower than other buyers paid.The district, traditionally focused on bread production, saw its economic growth outpace the national average by 9.1 percentage points in 2023 and 5.6 percentage points in 2024 consequently.
The trend continued in 2022 when smartphone manufacturer Xiaomi began acquiring land in the Ijuan area of Beijing for an EV factory. By 2024, Xiaomi had purchased land equivalent to over 206 football fields at an average price 22% below competitors’ rates for industrial land. Beijing stipulated the factory must generate a minimum annual revenue of $6.6 billion (47 billion yuan) at full production.
Xiaomi maintains it participated in an open tender process and did not receive special discounts or incentives, according to company statements. Auction documents published by the Beijing Municipal Management show Xiaomi was the sole bidder.
In June, Guangzhou authorities announced plans to incentivize up to three clean car manufacturers, each producing 500,000 vehicles annually. The city pledged to allocate up to 500 million yuan (approximately $70 million) annually to companies building new production lines and achieving a production of 100,000 cars within three years.