Subsidy Policies or Market Size? Exploring the Root Causes of China's EVs International Competitiveness

Abstract

In recent years, the production and sales volume of EVs (EVs) in China have increased rapidly, but the origin of their international competitiveness is not clear, and there is a great debate. Firstly, this paper constructs a theoretical model of oligopoly competition in an open economy, and reveals the internal mechanism of market scale, subsidy policy, technological innovation and other factors affecting the international competitiveness of export products. Then, based on the reality of subsidies, sales and exports of EVs in China from 2018 to 2024, a data model was constructed to empirically test the theoretical analysis conclusions. The empirical results show that although government subsidies have promoted the development of China's electric vehicle industry in the initial stage, the domestic market size is the root cause of China's international competitiveness of EVs. Further mechanism analysis shows that economies of scale and technological innovation are two important ways for domestic market size to enhance the international competitiveness of China's EVs. Therefore, relying on the huge domestic market scale, promoting the reduction of the average cost and technological innovation of China's electric vehicle enterprises is the fundamental way to enhance the international competitiveness of China's EVs. This paper provides theoretical and empirical basis for how to enhance the international competitiveness of China's EVs.