A suite of government incentives and policies has swept China to the forefront of the market for EVs, solar panels and batteries. Photo / Getty Images
China calls them the “new three” – electric vehicles, solar panels and lithium-ion batteries – a set of technologies to replace the country’s previous export focus on furniture, clothing, and household appliances.
And those technologies have something in common: they were all invented in the United States.
Since the early 2000s, a suite of government incentives and policies has swept China to the forefront of the market for EVs, solar panels and batteries.
But most of the world’s clean technologies were initially invented in the US. In an alternate reality, the US could have become the world’s leader.
Here’s how the US lost its early advantage – and how China surged ahead.
Once, it looked like America’s roads would be filled with electric cars. The US inventor William Morrison developed the first successful electric car in 1890, and interested urbanites soon began converting stables to charging ports.
By the early 1900s, about one-third of all vehicles on the road were electric.
In New York City, a cab company called the Electric Vehicle Company operated electric vehicles with exchangeable batteries, like an early form of Uber or Lyft.
At the time, however, many rural areas still lacked reliable electricity: it wasn’t until the 1930s that widespread electrification got under way.
Oil companies, though, had already created a network to distribute fuel across the country.
“A lot of rural America was still using gasoline for stoves and kerosene for home lighting,” said David Kirsch, a professor of management and entrepreneurship at the University of Maryland.
“You could buy it at many, many general stores across the country.”
That made fuel engines more convenient for consumers. The internal combustion engine was improving much faster than battery technology.
The Ford assembly line allowed the new fuel cars, like the Model T, to be produced more quickly. By the 1930s, there were only a tiny number of EVs on the road.
More than 50 years later, the country had another chance.
California said it would require automakers to sell a certain amount of electric vehicles.
General Motors built the EV1, a small two-seater sedan that became quickly popular in the state. But when the California regulators backed off the plan in the mid-1990s, GM quietly repossessed the vehicles and discarded them. The US would continue to focus on fuel cars.
It was that dominance in fuel-powered cars that initially motivated China to move into EVs more than a decade ago.
Around 2010, China’s Minister of Science and Technology, Wan Gang, began pushing the country to branch out into electric cars.
American companies were already dominating combustion engines, and the country was looking for technologies that its companies could dominate over the next few decades.
Between 2010 and 2023, China rolled out a huge bank of subsidies to encourage EV adoption.
Interested buyers could get a rebate on an EV of up to 60,000 yuan, or roughly US$8000 ($13,600) – a huge benefit in a country where the average new car costs just US$23,000.
EV owners also were exempt from sales tax and received a special coloured licence plate (green instead of blue) that allowed them to bypass the years-long wait for a licence.
Manufacturers also received boosts, including tax breaks and faster permitting and siting for factories that produced EVs and batteries.
According to one estimate from the Centre for Strategic and International Studies, the Chinese Government poured around US$231 billion into EV adoption – and that’s likely an underestimate.
The investments paid off.
In 2010, both China and the US were selling just over 1000 EVs a year. Last year, the US sold 1.2 million – while China sold 6.4 million.
And as Congress cuts EV incentives, the divide is likely to widen.
“There’s a real danger of the US becoming more technologically isolated in the automotive sector,” said Ilaria Mazzocco, deputy director and senior fellow in Chinese business and economics at the Centre for Strategic and International Studies.
Batteries followed a similar trajectory to electric vehicles.
In the early 1970s, M. Stanley Whittingham, then a scientist at Exxon, created the first functional lithium-ion battery – a design that was later improved upon by John Goodenough at the University of Oxford and the Japanese scientist Akira Yoshino at Asahi Kasei Corp.
Initially, the new technology became popular in the 1990s in electronics such as early laptops and cellphones – they were compact and reliable. By the early 2000s, the batteries began making their way into a new generation of electric cars.
An American company called A123 was an early manufacturer of lithium iron phosphate batteries with enough capacity to power a car. In 2009, the Department of Energy gave the company hundreds of millions of dollars in a grant under the American Recovery and Reinvestment Act.
But the US wasn’t boosting the sales of EVs, and early battery companies struggled to find a toehold in a market dominated by fuel-powered cars and trucks.
A123 went bankrupt and was later purchased by a Chinese company. By the early 2010s, as China boosted its sales of EVs, the country was also pouring billions of dollars into battery technology and battery manufacturing.
At the same time, the country invested in processing critical minerals like cobalt, nickel and graphite – adding stability to the complex battery supply chain.
In 2021, the technology got another boost: China began to require that companies add 10 to 30% battery storage to the grid for each gigawatt of wind or solar coming online. Battery production surged.
“It just exploded,” said Iola Hughes, head of research at Rho Motion, a battery research firm and part of the consulting firm Benchmark Mineral Intelligence.
Today, China boasts 85% of the world’s global capacity for battery cell manufacturing. For EV batteries, the picture is even starker: China holds 94% of the market share for producing lithium iron phosphate batteries.
For decades, solar panels were a distinctly American creation.
In 1954, scientists at Bell Labs created the world’s first commercially viable solar cell, which converted 6% of incoming light into electricity.
By the 1970s, solar was booming in the US. The country was in the midst of an oil crisis, and the federal Government directed millions of dollars into research and development of solar.
Scientists and engineers from around the world flooded into the US to develop solar technologies. President Jimmy Carter had 32 panels installed on the roof of the White House.
According to one estimate, 95% of the world’s solar industry in 1978 was based in the US.
But in the 1980s, everything changed.
President Ronald Reagan slashed funding for renewables and research and development into solar power.
“It was really ideological,” said Greg Nemet, professor of public affairs at the University of Wisconsin at Madison. “They cut the solar budget by 85% within a couple of years.”
Germany and Japan filled the vacuum left by American leadership, gobbling up experienced engineers and scientists.
Then, in the early 2000s, European countries began offering huge subsidies for installations of wind and solar.
Chinese companies saw an opportunity – and started building millions of panels.
“There was a lot of growing demand in the early to mid-2000s, thanks to all these incentives in Europe, and a lot of entrepreneurs in China just set up factories to serve that demand,” Mazzocco said.
After the 2008 financial crisis, Europe shut down those subsidies as the continent shifted towards austerity. But unlike the US decades before, China decided to continue to support the development of solar power.
“The Chinese Government stepped in,” Mazzocco said.
So far, China has invested US$50b in new solar power production, and the country now accounts for about 80% of the global solar supply chain.
Today, eight of the top 10 solar panel manufacturers are based in China. The other two are in India and Singapore.
Experts say that the country’s success is based on two things: reliable policy and a push to adopt the new technologies.
“I look across the period from say ’69 to the present – what strikes me is how inconsistent we have been with policy,” said Kirsch. “The Chinese have just cleaned our clock by having consistent policy.”
At the same time, China pushed consumers to adopt the technologies even as they encouraged manufacturers to build them.
“Technologies succeed when you combine a technological opportunity with a market opportunity,” said Nemet.
Despite all of the US inventions, Nemet says, the country never focused on making sure there was enough domestic demand for those technologies.
“The US was really good at creating these technological opportunities – but we just weren’t supporting the market side enough,” he said.