Breaking the ICE

Over the last decade, China has promoted electromobility more firmly than any other country. Around 2009, the government firmly shifted gear towards electromobility and in the more recent 'Made in China 2025' plan defined "New Energy Vehicles" as one of the seven strategic emerging sectors with the aim of reaching 80% EV share in total Chinese car sales and 20% share in the total vehicle stock by 2025. A comprehensive policy package was developed to promote electromobility, including measures directed to firms, e.g. restriction policies on new vehicle registrations and mandatory electric vehicle percentage targets; purchase subsidies for consumers - 4.5 billion euros between 2009 and 2015; and public procurement together with government-funded research. As a result, between 2015 and 2020 the stock of electric passenger vehicles increased from 0.3 to 4.5 million and in 2020 44% of the world's electric cars circulated in China.
Many Chinese firms were able to catch up and even leapfrog ahead of their international competitors in electromobility-related technologies. There were no Chinese firms among the global top 20 patent applicants until 2006. Ten years later, half of the top 20 applicants were from China. The increase in China's world share of patents (from 4.4 % in 1994 to 39.3% in 2014) went hand in hand with a growth in the quality of patents, as shown by the increasing number of applications at international patent offices and by the growing number of Chinese patents' citations. Four Chinese manufacturers are now among the global top ten in the EV market - BYD (10.0% of the world market share), BJEV (7.1%), SAIC and Geely (3.4% each) - in stark contrast to the ranking of traditional car manufacturers, where the top ten are all non-Chinese.

Technological leadership has been fully achieved in the production of electric buses, with China having 98% of the 513000 electric buses operating worldwide in 2019. In most of the big cities, the electric buses' share in the public bus fleet exceeds 50%, with Shenzhen achieving full electrification of its 17000 bus fleet in 2017. Five bus manufacturers dominate the Chinese market and two of them, BYD and Yutong, are successfully exporting and rapidly expanding their global networks of assembly plants. In Europe, the home of leading diesel bus companies (Volvo, MAN, Mercedes and Solaris), BYD (29% e-bus market share) and Yutong (7%) successfully compete with incumbents, despite the latters' long-established service networks and ties with local transport operators.
Chinese firms are also at parity with Japanese and Korean multinationals in the lithium car battery value chain, with 73% of world lithium-ion battery cell manufacturing and 101 of the 136 lithium-ion battery plants that by May 2020 were in the pipeline to 2029 concentrated in China. Contemporary Amperex Technology Co Ltd. (CATL) has become the world's largest battery maker since 2017, and BYD Lishen Battery and Guoxuan High-Tech are also among the world's top firms.

It took China little more than a decade from starting to invest in batteries to become the largest world manufacturer; from producing the first electric bus to capture 96% of the world market; from being absent in the technological development, to producing almost 40% of total patents. In ten years, companies such as CATL in batteries and BYD in bus manufacturing have become global leaders. This speed suggests that catching up and leapfrogging may also be expected in other market segments, especially in the emerging fields of autonomous and connected driving and new mobility services, where China may challenge and eventually outcompete globally leading technology companies. While the technologies are still at an infant stage, the large number of start-up companies with financial backing from internet giants Tencent, Baidu and Alibaba make these market segments likely candidates for the next Chinese leapfrogging success.