What Can We Learn From How China Took the Lead in Electric Vehicles?

For over a century, the global auto industry was shaped by a few dominant players. Germany perfected engineering. Japan mastered efficiency. The United States led in mass production. Each had its strengths, and each controlled a key part of the market.

But the EV revolution is reshaping that balance, and one country is moving faster than the rest.

China now leads the world in EVs. In 2022, Chinese automakers accounted for nearly 60 percent of global EV sales, and more than half of all electric cars on the road are in China. The country also produces 35 percent of global EV exports, a number that continues to rise.

This is a fundamental change in global competition.

The United States is responding with tariffs and massive domestic investment to secure its EV supply chain. Europe is keeping its market open for now but is under growing pressure to introduce protective trade measures. Meanwhile, China is doing more than just exporting EVs. It is setting up production inside Western markets. BYD, one of China’s largest EV makers, is building a factory in Hungary, securing a foothold inside the European Union.

At the same time, Western automakers are still investing in China. Volkswagen, BMW, and Tesla are expanding factories and forming joint ventures to stay competitive in the world’s largest EV market.

Despite rising competition from domestic Chinese brands, they see China as too important to abandon.

So, what’s next?

To understand the future of this EV war, we need to examine how China built its lead and what the rest of the world can learn. Three key strategies stand out:

1. It entered the EV market from an unexpected angle.
2. It solved infrastructure challenges before scaling.
3. It secured control over the most critical part of an EV: the battery.

As Chinese automakers establish themselves in Europe, the question isn’t just how they got here but how the rest of the world will respond.

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A Different Starting Point

While Tesla and Western automakers focused on passenger EVs, Chinese companies took a different route. BYD and Geely concentrated on electric buses and motorcycles before shifting to cars.

• Electric buses required high-capacity batteries with long operating hours, forcing BYD to develop more efficient energy storage.
• Electric motorcycles needed lightweight, portable batteries, which helped Geely refine compact power solutions.

This approach allowed both companies to master battery technology in less competitive markets before scaling up. When they finally entered passenger EVs, they had a technical head start.

Building the Infrastructure to Support Growth

Adoption isn’t just about making a great product. If an EV company wants to succeed, it must ensure the vehicles can be easily used at scale.

China addressed this early. Instead of waiting for the charging network to catch up, EV manufacturers worked with taxi fleets and city planners to build charging solutions that made large-scale deployment viable.

• Charging schedules were optimized so that morning-shift taxis charged at night and evening-shift taxis charged in the early morning.
• This approach reduced strain on city power grids while ensuring fleets remained operational.

These early efforts laid the foundation for mass EV adoption, proving that infrastructure is as important as innovation.

Controlling the Core Technology: Batteries

For decades, automotive dominance was built on combustion engine expertise. China lacked this legacy advantage, so it focused elsewhere: batteries, the most expensive and complex part of an EV.

By 2022, China produced 70 percent of the world’s rare earth minerals, a key component of EV batteries. It also dominated battery production and refinement, with companies like BYD and CATL controlling significant parts of the supply chain.

Western automakers, by contrast, largely outsourced battery production. When supply chain disruptions hit in 2021, they scrambled for critical materials while Chinese manufacturers continued production uninterrupted.

Next Move: Manufacturing in Europe

China’s EV makers aren’t stopping with exports, but they are setting up production inside Europe. In December 2023, BYD announced its first European factory, located near Szeged, Hungary. This plant, expected to begin production by 2026, will significantly alter the European market.

Why Hungary?

• Skilled Workforce & Szeged University - BYD can benefit from local talent, collaborating with academic institutions for R&D and workforce development. The University of Szeged is a leading research institution in Hungary, and its expertise in chemistry and physics may support industrial collaborations.
• Hungary’s growing EV ecosystem – The country is already home to BMW, Mercedes, and battery giant CATL. With BYD joining them, Hungary is becoming a major European EV hub.
• Bypassing EU tariffs – The European Union is considering import restrictions on Chinese EVs. Local production allows BYD to avoid these potential barriers.
• Increased competition for European automakers – Volkswagen, Renault, and Stellantis will now face direct competition from a high-tech, cost-efficient Chinese rival on their home turf.
• Business-Friendly Policies & Government Support - Hungary actively courts foreign direct investment (FDI) with tax incentives, subsidies, and infrastructure support. The government has prioritized EV and battery production as a key growth sector
• Low Production Costs Compared to Western Europe – Hungary offers a lower cost of labor and operations than Germany or France while still being inside the European single market. This allows BYD to keep costs down while meeting EU production standards.

This factory signals China’s long-term commitment to competing in the European market. As China’s EV makers move production closer to consumers, European automakers will face growing pressure to adapt, innovate, and defend their market share.

Lessons for Other Industries

China’s rise in EVs offers a clear strategy for disruption that applies beyond the automotive industry. Companies that reshape markets don’t always follow the established path.

They find overlooked opportunities, remove barriers to adoption, and secure control over the most critical technology.

Here are three key lessons:

• Look for entry points others ignore. BYD and Geely avoided going head-to-head competition until they had an advantage.
• Solve adoption challenges early. Infrastructure barriers can kill even the best innovations. Companies that enable large-scale use gain an edge.
• Control the key technology. Competitive advantages shift over time. Owning the critical component of a product secures long-term leadership.

China’s EV makers didn’t just compete, but changed the rules. The same principles apply to any industry facing disruption. The companies that recognize shifts early and position themselves strategically will be the ones that lead the next wave of innovation.

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