Electric vehicles in China: BYD strategies and government subsidies

Masiero, Gilmar; Ogasavara, Mario Henrique; Jussani, Ailton Conde; Risso, Marcelo Luiz · 2016 · OpenAlex-citations

DOI: 10.1016/j.rai.2016.01.001

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Summary

This paper examines the rapid expansion of China’s electric vehicle (EV) industry, specifically analyzing how government subsidies and corporate strategies drove the success of BYD, the largest Chinese EV manufacturer. The research is motivated by China’s strategic shift to reduce dependence on oil imports and mitigate environmental pollution, leading to heavy state investment in New Energy Vehicles. The authors aim to identify the factors contributing to the effective adoption of EVs in a developing country context, highlighting the interplay between state support and private sector innovation. The study employs a qualitative case study methodology based on primary and secondary data. Primary data were collected through in-person interviews with management at BYD’s headquarters in China and its Brazilian subsidiary. Secondary data included industry reports, government policy documents, and academic literature. The analysis covers BYD’s evolution from a battery manufacturer in 1995 to a global automotive leader, detailing its technological developments, market strategies, and the specific financial incentives provided by central and local Chinese governments. The findings reveal that BYD’s success stems from a combination of proprietary technology and strategic alignment with government goals. BYD developed a core competency in iron-phosphate batteries, which are safe, recyclable, and durable, enabling the production of pure electric vehicles (BEVs) and plug-in hybrids (PHEVs). The company implemented a “7 + 4” Green Mobility Strategy, targeting the electrification of seven on-road transport sectors (e.g., taxis, buses, logistics) and four off-road environments (e.g., mining, airports). This strategy was supported by a comprehensive ecosystem including solar power generation and energy storage solutions. Crucially, the paper details extensive government subsidies that lowered costs for consumers and producers. Central government incentives ranged from $5,000 to $80,000 depending on vehicle type and range, while local governments in cities like Shenzhen and Shanghai provided additional matching subsidies. These financial supports were essential in an incipient market where battery costs accounted for approximately 50% of total vehicle production costs. The significance of this research lies in demonstrating how state intervention can accelerate the development of emerging green technologies in developing economies. The authors conclude that while subsidies are critical in the short term to foster demand and offset high production costs, long-term sustainability depends on technological improvements that reduce battery costs and increase vehicle range. The case of BYD illustrates that successful industry expansion requires not only financial incentives but also a coherent corporate strategy that integrates product development with infrastructure solutions, such as charging facilities and energy storage, to create a self-sufficient zero-emission ecosystem.

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