Electric mirage: how China’s EV boom masks an industry in crisis Analysis by The Atlantic

China’s electric vehicle (EV) revolution, often hailed abroad as a symbol of technological ascendancy, is revealing cracks that the world rarely sees. The Atlantic highlights a striking anomaly in the Chinese EV market: heavily discounted “used” cars that have never actually been driven. This practice stems from a system in which automakers sell vehicles to dealerships to meet sales quotas, prompting dealers to offload them as second-hand, often at steep discounts. What seems like a consumer boon actually exposes deep structural weaknesses in China’s EV industry, the consequences of decades of government intervention and overinvestment.

The article argues that China’s EV sector is a microcosm of the pitfalls of state-led capitalism. Massive government subsidies—over $230 billion from 2009 to 2023—accelerated the growth of domestic EV manufacturers, but also encouraged an unsustainable glut of production. With 46 domestic and international automakers competing for a crowded market, intense price wars and slim profit margins are now the norm. Even consolidation, with 11 companies dominating the market, may not be enough, as the industry remains undercapitalized for its scale and overly dependent on state support.

This distortion is compounded by local and national authorities unwilling to allow factories to fail. Cities like Wenzhou and Hefei have actively intervened to rescue companies such as WM Motor and Nio, despite continuing financial losses. Such interventions, while politically expedient, undermine market mechanisms and perpetuate inefficiencies. The Atlantic notes that Beijing’s focus is not merely on domestic stability but on global dominance, aiming to outcompete established automakers in the U.S., Europe, and beyond, even at the expense of profitability. This strategic, predatory model has allowed China to sustain inefficiency at home to capture global market share—a move that Western observers often misinterpret as market strength rather than engineered distortion.

The repercussions extend beyond China’s borders. International countermeasures, including U.S. tariffs maintained under the Trump administration and mirrored by the EU, Canada, Türkiye, and Mexico, threaten Chinese exports. Restricted access to key foreign markets amplifies the sector’s vulnerability, highlighting the tension between Beijing’s ambitions and global economic realities. At the same time, artificially low EV prices driven by subsidies distort competition worldwide, forcing other governments to intervene to protect domestic industries.

Ultimately, The Atlantic frames China’s EV boom as a paradox: while the country leads in production and innovation, it does so at a precarious cost. The sector’s growth is propelled less by sustainable market forces and more by aggressive state direction. Analysts warn that the system may not endure indefinitely, as the fiscal burden of subsidies, combined with ambitious goals in AI and semiconductors, makes the current model unsustainable. China’s EV industry may achieve global market dominance, but in doing so, it risks being a financial catastrophe—a cautionary tale of what happens when state power overrides market logic.

By Vugar Khalilov