China's Electric Vehicle Revolution: What Drove the Growth?

ABSTRACT

This paper examines the key drivers behind the rapid rise of China's electric vehicle (EV) industry, emphasizing the interaction between market forces and government policy. We argue that China's success reflects the synergy between the two rather than either government intervention or market competition alone. On the market side, intense competition, broad participation, learning‐by‐doing, and the development of a dense domestic supply chain accelerated technological progress and cost reduction. On the policy side, the government implemented a comprehensive and adaptive policy framework, including demand‐side incentives, technology‐oriented industrial policies, charging infrastructure investment, standardization, and opening‐up measures that addressed key market failures while reinforcing market incentives. Together, these forces created a self‐reinforcing cycle of innovation, market expansion, and productivity growth, enabling China to become the global leader in EV production, innovation, and exports. The paper concludes with broader lessons for industrial policy and emerging technology industries.