Accounting for over 70% of global electric vehicle (EV) production, China’s rise to the spot of the world’s biggest manufacturing hub has been more than two decades in the making. The country’s leadership pivoted away from traditional manufacturing to prioritise foundational tech infrastructure and made a massive bet on EVs starting with in its 10th Five-Year Plan (2001-2005). Years later and after billions of dollars in state-sponsored backing or financial grants, the Chinese EV industry has begun to asset its global dominance across the entire EV supply chain. That said, China’s EV boom hasn’t materialised exactly how its central leadership had planned; with several state-owned EV manufacturers now being relegated to the bottom of the country’s EV sales chart. Instead, privately backed players lead the domestic EV market, with some having scripted remarkable turnarounds with the help of VC funding and strategic capital infusion from provincial governments. This dynamic warrants a closer look at the various strategies that have helped fuel and sustain China’s EV industry, with a key focus on how other countries could leverage these learnings to establish their own science and technology innovation hubs with global influence.
How Private Companies, States and Vcs Got Together to Create Ev Giants
Unlike the popular narrative, many state-owned EV manufacturers that were backed by the Chinese government are either no longer relevant or are struggling to regain their lost sheen. Even though Wuling, which is a partnership between China’s state-owned automotive behemoth SAIC Motor and General Motors (GM), was the 3rd largest EV-selling brand in 2025, private players like BYD and Geely command significantly higher market shares. At the 1st and 2nd positions, respectively, BYD and Geely together accounted for nearly a third of all domestic EV sales, underscoring the growing importance of private carmakers in what is the world’s largest EV market in terms of both domestic sales and export volumes. Surprisingly, BYD was backed by marquee investors like Warren Buffet’s Berkshire Hathaway in 2008, while Geely was self-funded by its founder Li Shufu during its initial years, before it resorted to international loans for funding later acquisitions and daily operations. While it is estimated that the Chinese government provided a cumulative $230.9 billion between 2009 and 2023 in the form of rebates, sales tax exemptions, R&D grants, infrastructure subsidies and government procurement; the direct investments made by municipal and provincial governments in new EV players or the quantum of low-cost land, electricity, and credit provided are not included in the above figure. What’s more, subsidies for miners, chemical and battery manufacturers have grown exponentially in the recent past, alluding to sustained expansion of industrial support being offered to China’s EV industry and supply chain constituents.
Understanding the Hefei Model and Why It is Being Widely Emulated
With nearly all of China’s 31 provincial-level jurisdictions having launched EV subsidy and manufacturing programs to advance equity when it comes to vehicle electrification, some provinces went a step ahead and adopted a state-led venture capital approach to invest in or bail out private EV manufacturers. A notable example is that of the city of Hefei, which invested more than 10 billion yuan in ailing EV firm NIO in early 2020, in turn leading the EV maker to set up a massive 11 sq.km manufacturing complex in Hefei while also creating thousands of high-skilled technology jobs. Even though Hefei later divested its entire stake for a sizable profit, this model, where local governments come in as strategic investors, is gaining ground across cutting-edge industries. Referred to as the "Hefei model", many Chinese provinces have since taken equity stakes in high-tech companies, in addition to establishing local supply chains and transforming agrarian centres into global technology & manufacturing hubs.
What the World Can Learn From China
While Beijing may have backed many state-owned giants in a bid to drive the EV revolution in a few specific cities, the country’s continued focus on promoting new-gen technologies whilst simultaneously uplifting domestic consumption has provided many learnings for the world at large. Similarly, the strategic pillars of the Hefei model that include patient capital combined with risk-taking, building an ecosystem in return for tax breaks, and reinvestment of profits into the next emerging technology frontier have become a template across other provinces in China today. Using these strategies, other economies would do well to devise specific frameworks for converting new technologies and scientific breakthroughs into operational businesses. Ultimately, the Chinese EV boom also serves to highlight the perils of centralised planning while highlighting how private players leverage autonomy to drive an industry’s eventual success.
Eshaan Lazarus is the Founder & Chief Executive Officer at 021 Trade. Views expressed are the author's personal.