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The world's biggest buyer of electric and hybrid vehicles is one that used to be known as a manufacturer of cheap goods — China. The country's choking pollution problem, heavy government subsidies and large population have automakers eyeing the country as the next frontier.

Do the Chinese like EVs (Electric Vehicles)?

In Beijing and Shanghai, names such as Geely and BYD are even more popular than Western brands. The Chinese government has invested billions of dollars in the electric vehicle industry, making Tesla-wannabes much cheaper and more affordable to Chinese citizens.

That means that while Teslas are relegated to the garages of movie superheroes and billionaires in Western societies, the average Chinese can afford an electric vehicle.

A two-door electric Chery eQ costs about $8,655 after subsidies (and $14,500 without) in Shanghai in 2016. Meanwhile, General Motors' Bolt EV costs around $30,000 after a tax credit.

The result? China sells more electric vehicles than anywhere else in the world, combined.

And it's not just energy-efficient cars China is investing in. Big companies such as Baidu—China's answer to Google—are spending heavily to develop self-driving, or autonomous vehicles.

The likely future of EVs in China

To Chinese, self-driving cars may be more than just the pipe dream of Googlers. According to the World Economic Forum, three-quarters of Chinese would ride in a self-driving taxi, compared to just a little over half of Americans would. The Boston Consulting Group forecasts China will be the largest market for self-driving cars in 20 years.

The Chinese market may seem perfect for new-tech automobiles. Pollution is a public health and political problem, and driving in many congested Chinese cities is a nightmare. (Unlike traditional cars, electric vehicles (or EVs) run on batteries and don't require oil, so they don't emit pollution).

But that doesn't mean the demand for better technologies is enough to put safe, reliable new high-tech vehicles on the road.

First, the technology and infrastructure to power EVs are still developing. Globally, EV's still comprise less than 1% of cars on the road.

Behind the reported numbers

While China's sales have been impressive so far, anecdotally, Chinese EVs are smaller and powered by less advanced technology.

Sale numbers have also been heavily propped up by government support. Beijing spends on subsidies for manufacturers and researchers, making cars cheaper. It also mandates foreign players team up with local companies in the form of joint ventures in order to operate in China. That means Chinese auto companies get the know-how and technology while foreign companies get the right to sell within the country.

The problem with this is any time there is a change in market demand. Sales of EVs recently plummeted after the Chinese government changed policies on some of its subsidies.

There are also global reasons China's booming EV market may not be as robust as it seems. The plunge in oil prices in recent years has been detrimental to EVs, as traditional cars were made cheaper. But no matter how low the price of oil drops, EVs have an intangible "cool" factor (look at how environmentally conscious and forward thinking I am) that is hard to price.

And while consumers dream of the purr of a Tesla, few outside China are hankering to buy a Chery eQ.

Will China outpace the U.S. in the electric car race?

The low price point of EVs in China has been positive for the Chinese consumer and the country's smoke-choked skies. It shows just how beneficial subsidies can be in persuading consumers to do good. But it also shows the limits.

For all its seeming might, however, the worries that China will outpace and out-innovate the U.S. are still overblown. The world's most lucrative companies are still housed in the U.S. While Google's self-driving car program was launched in 2009, Baidu — China's answer to Google — began research in 2012.

The future of electric vehicles in the U.S.

American policymakers ought to support the development of new technology such that it makes financial sense for consumers to buy electric vehicles. Viewing China as a case study, those supports should not be in the form of direct subsidies. The companies can then spend more on research and development.

With increasingly efficient technology, more research and development, the benefits of EVs will become very obvious, and savings from economies of scale can be passed on to consumers.

There are some signs the market is moving in that direction already. One large breakthrough for the acceptance of EVs into the mainstream has been the lower price of batteries.

The tortoise and the hare...

It seemed long ago when China was known as "the world's factory," making most of the world's shoes, electronics, and toys at a fraction of the cost in the West. Now, the country is a hub of innovation that creates and produces technology that has never before existed. And we can learn a lot from it.

With the right policies and research going forward, there's no doubt that the future of driving lies in vehicles that will be electric, good for the environment and maybe — someday — driverless.

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