The Rise of China’s Electric Vehicle Industry

**Jordan Schneider** (0:00)
How did China grow its EV industry? Hint, it's not really central planning from Beijing. It was a magical concoction of entrepreneurs and local officials using their guanxi to dance around giant SOEs and central government regulation, leverage private and foreign capital, and just like be really excellent business people, which has led to our situation in 2026 of these world beating companies, which have a ton of over capacity and are set to take over the planet. To discuss, we have ANU professor, Fengming Lu, who recently wrote a fantastic paper about this topic we'll link to in the show notes, as well as Irene Zhang, contributor and analyst at ChinaTalk.
We also get into the lessons the story holds for other strategic industries, like robotics and AI, as well as a little discourse into the Chinese podcasting ecosystem.

**Irene Zhang** (0:53)
Professor Lu, welcome to the show.

**Fengming Lu** (0:55)
Well, it's really my honor to join ChinaTalk.

**Irene Zhang** (0:58)
Well, I had an amazing time reading the paper, and it was just incredibly interesting to learn the long history of how the global wave of Chinese TV we're seeing today really came about.
I want to start by hearing the story on your side of how you and your co-author came up with the idea for this paper. So how did you get interested in EVs as a research topic and decide to write this?

**Fengming Lu** (1:23)
Yeah, actually, it's more related to my own research agenda. I started doing research about EV a few years ago, actually, roughly during the final few years of COVID.
So after that, well, I've been mostly doing fieldwork and other stuff and started writing papers and working on book projects starting from last year. So the original idea is that, well, I was thinking about writing some of the first papers for my research project about EV.
So actually, my co-author and I, well, we knew each other very well. So we actually came across several questions from senior scholars studying Chinese governments and Chinese economy. Actually, one of the first puzzles they rose was that, well, actually in the last 10 or 20 years, especially after 2012, you will see actually this rise of SOEs, state-owned enterprises. In many corners of the Chinese economy, but actually you will find the automotive sector or the EV sector actually is an exception. It's probably not the only exception. If you look at all those tech sectors in China, actually most of them actually are dominated by private firms rather than SOEs. So actually it's a pretty interesting puzzle for people who are interested in China. So my co-author and I thought, well, maybe it's a good idea to first, well, start writing a paper about this. And my co-author also added some other cases, well, from her, from his expertise, like from pseudocalls and steel manufacturing, well, which also makes sense, that well, this private sector actually, based on their collaboration with Chinese local governments, will actually excel to pretty much at the expense of traditional, more established SOEs. Yeah.

**Jordan Schneider** (3:17)
So I think I thought this was the most fascinating arc over the course of your paper was, on the one hand, we have Xi Jinping, like biggest SOE cheerleader we've had in a few premieres.
But perhaps the most globally impressive, successful industrial leapfrogging has taken place in industry where the SOEs were basically stuck and kind of doing nothing. And there were two different development pathways that have been tried. They partner with the foreign automakers as well as build it themselves. And they've been fine, but not anything all that impressive. And all of a sudden, as you explore in this paper, you have this really interesting mix of private capital, entrepreneurs, local government, local governments and sort of regional incentives, dancing around what space the central government and the big SOE car makers have in order to, you know, create this like incredible flourishing we've seen over the past 10 years. So maybe let's do a little bit of a timeline of the Chinese car industry. Why don't you take us back to the 90s, let's say. How, where can we start to see the seeds of the EV boom in that time?

**Fengming Lu** (4:41)
Yeah, absolutely. So, well, both of you, well, thank you, Jordan and Yering, because, well, you really read my paper, whereas I'm just reading the abstract. So back in the 90s, actually, the Chinese automotive industry was in a very different shape compared to what it is now. The size of the market was somewhere, well, if you're talking about passenger vehicles, well, cars, well, SUVs or whatsoever, it was only about like half a million of those sold every year. So it was a much smaller market. It was comparable to the size of Poland back then or Vietnam today.