China’s EV supremacy is not just luck

Lee Sang-ryeol
The author is an editorial writer of the JoongAng Ilbo.

Nobody took the Chinese auto industry seriously 20 years ago. Global carmakers flocked to the country to build assembly lines in joint ventures just to capitalize on the vast consumer market and cheap labor. Local brands posed no threat to American, German or Japanese counterparts. So, China turned to electric vehicles. American and German carmakers dominating the traditional internal combustion engine (ICE) car market did not have much interest in EVs at the time. Japan, which was ahead in hybrid technology, also was passive toward going fully electric.

Central in China’s shift to EVs was Wan Gang, who studied in Germany after the Cultural Revolution and worked at Audi, in charge of technical innovation. Predicting the rise of the eco-friendly era, he pitched to Beijing that China should promote EVs if it did not want to remain an original equipment manufacturer, as it could not compete in the ICE market. He left his comfortable life in Germany and returned home in 2000. After serving as the president of Tongji University, he was appointed as the science and technology minister in 2007, China’s first non-Communist Party cabinet member in 35 years.

Leading the ministry for 11 years, Wan devoted national resources to build the EV industry. Beijing provided substantial subsidy and tax breaks to promote EVs. Tax deductions on EV purchases totaled $30 billion between 2009 and 2022, according to Bloomberg. The government established massive charging infrastructure and even changed public transportation vehicles like buses and taxis to EVs to ensure revenue for new companies. Wan is dubbed the “father of Chinese EVs.”

China is out to replace Japan as the world’s largest auto exporter this year. It exported 3.21 million vehicles as of August, outnumbering Japan’s 2.77 million. Today, EVs make up the mainstay: One out of every three vehicles shipped out of China is an EV.

The United States and European Union are fearful of Chinese EVs. They have to admit that they cannot compete with the cheap yet quality Chinese EVs. The U.S. Inflation Reduction Act and the EU’s investigation on China’s EV subsidy reflect their apprehension. Regulations may slow imports, but they may not catch up with Chinese EV technology easily. Above all, they lack the EV ecosystem China has built over the past two decades across the battery industry and mineral supply chains.

Can Korea work the miracle China did? Can the country bring a top-caliber engineer from overseas and give them full authority over EVs? Can the government offer radical tax incentives to the new industry? And could it overhaul the social system to build the new ecosystem?

During the early industrialization period, Korea did the same. President Park Chung Hee personally encouraged overseas scientists and engineers to return home. The recruits to the Korea Institute of Science and Technology (KIST) were given unconventional benefits. Their pay tripled that of professors at national universities and they earned more than President Park. The president specifically ordered the government not to touch the budget for KIST. The fruits from the labs — color TVs and fiber-optic cables for telecommunication — were commercialized by private companies. When Samsung Electronics wished to build a chip factory in Giheung, Gyeonggi in the 1980s, the government exempted the company from stifling regulations on building industrial plants around the capital region. The factory poured out the world’s first DRAM memory chip.

The government and private companies moved as one team. That’s how Korea became the powerhouse in auto, chip and ship production. But the government has lost much of its vision and passion. Companies competing with Chinese counterparts have long complained that they felt like they were fighting against China as a whole.

The government has been pledging to develop new industries for decades, but with little progress. Political fights, red tape and regulations served as a stumbling block for new industries and their growth. Entrepreneurship also has lost passion. The Korean economy has the fastest slowdown among advanced countries. The rise of promising industries works the miracle of creating jobs and building national wealth exponentially. But that miracle is only possible when political circles and the private sector share their vision and passion. The Korea economy needs such a miracle — desperately.