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FORTUNE.COM // SEPTEMBER 2019
But that’s just the start. China’s Society
of Automotive Engineers has said 40% of
passenger-vehicle sales in the country should
be full electrics or plug-in hybrids by 2030.
That’s not far off in an industry that plans in
decade-long increments. To support the push,
electric-car charging stations, some big enough
to charge several hundred cars at a time, are
popping up across major Chinese cities like so
many Starbucks. Hundreds of firms in China
are today manufacturing electric cars. A shake-
out is probably in the offing, as China’s overall
auto market softens and Beijing dials back the
subsidies that have spurred the proliferation of
EV startups. But the trend is clear: The country
that trailed the world during the 20th century
at developing cars that burn oil seems all but
certain to lead it in the 21st in developing cars
that hum on wired juice.
The result is an electric-car race in China
that’s fast-paced, financially risky, and anyone’s
to win. “It’s a little bit like the Gold Rush in
California,” says Stephan Wöllenstein, the head
of VW’s China business, who, as he offers this
analysis, is sitting in an air-conditioned confer-
ence room, a box of VW-branded facial tissue
on the table, on the top floor of the automaker’s
tastefully appointed China headquarters tower
in Beijing.
This summer, I spent some time in China
with a few of the leading contenders in the
electric-car race. They range from long-
established Chinese auto brands to brash
upstarts to well-capitalized Western compa-
nies like VW. There’s BYD, which according
to Bloomberg New Energy Finance was the
world’s largest maker of EVs for several years
until Tesla recently overtook it—and in which
Warren Buffett’s Berkshire Hathaway owns
about an 8% stake. There’s Nio, a money-losing
but technologically showy company that is pro-
ducing gadget-laden electric SUVs. And then,
of course, there’s Tesla, the California-based
icon founded by the mercurial Elon Musk,
whose pretty and pricey cars essentially created
the global electric-vehicle market. Tesla, which
declined to comment for this story, broke
ground earlier this year on a colossal electric-
car factory on the other side of Shanghai from
the spot where VW is building its new plant.
To those in the U.S. and Europe inclined to
fret about Chinese industrial hegemony, EVsviability of clean alternatives to dirty energy.
Electricity and oil producers are struggling to
ride— rather than be crushed by—a renewable-
energy wave. Banks are trying to shore up
their portfolios against losses induced by
climate change. Automakers, though, are at
a particularly scary fork in the road. The rise
of electric vehicles—machines with multiple
small motors instead of one big engine; with
batteries instead of a fuel tank; with unprece-
dentedly extensive software systems instead of
a transmission—is poised to redefine car mak-
ing. If established automakers don’t adapt,
and fast, the corporate infrastructure they
have long seen as a signature asset may prove
instead an insupportable stranded cost.
It’s far too soon to declare the end of the
internal-combustion era. In the six months
ended June 30, according to Wood Mackenzie,
an energy-data firm, 97% of all new passen-
ger cars sold globally had only an oil-burning
engine under the hood. But it’s not too early
to see that electric cars are coming on fast.
Indeed, sales are shooting up beyond many
supposed experts’ wildest projections. Glob-
ally, according to Wood Mackenzie, combined
sales of passenger EVs—including full-electric
vehicles, which have no combustion engine,
and “plug-in hybrid-electric” vehicles, which
augment their battery system with a combus-
tion engine—jumped 47% from the first half of
2018 to the first half of 2019, to 1.1 million. The
surge is being driven by a combination of fac-
tors: declining cost and improving technology,
notably for batteries; increasingly convenient
electric-charging infrastructure, particularly in
large cities; and hefty government support.
Who wins and loses globally in the auto
industry’s pivot to an electric-car future will
depend largely on who triumphs in China.
The country, home to notoriously polluted
urban skies and a population gaga for SUVs,
has become, in just the past few years, by far
the biggest electric-car market in the world.
Owing to a potent mix of government subsidies
and mandates—policies driven both by local
environmental concerns and by an intent to
dominate a burgeoning global technology—
China accounted for 54% of the world’s sales of
plug-in-hybrid and full-electric cars in the year
ended June 30, Wood Mackenzie says. The
U.S. share: 16%.