The core of China’s EV price competitiveness lies in reducing costs through in-house manufacturing and component clustering without relying on government support, together with accumulated production scale from its huge domestic market. Chinese manufacturers, led by BYD, are maintaining their price advantage and accelerating development through CTB technology and LFP batteries.
Government purchase support has been trending down since 2026, but in China, a high proportion of BEVs are cheaper than ICE vehicles even at pre-subsidy prices. Without relying on public support, an industry-wide cycle of cost reduction has begun to turn. In-house manufacturing, scale and clustering, and development speed are the three pillars of the industry structure.
The first factor is the ability to source major components within the company group. BYD and others manufacture components in-house, from batteries and motors to electronic control units. Compared with Japan’s multilayered parts network, this limits intermediate margins and improves price competitiveness by managing the process internally from raw materials through finished vehicles. CTB technology also reduces the number of components, lowering vehicle manufacturing costs.
The second factor is the size of the domestic market and the accumulation of production scale. As of 2025, EV sales in China stood at approximately 13 million units, accounting for about 60% of global sales, while China was responsible for about 75% of global EV production. The efficiency of large-scale factories and the geographic clustering of parts supply networks are speeding up procurement and production.
The third factor is the speed of development. Shared vehicle platforms and the use of digital technologies have enabled shorter development times than in the past. Companies are reassessing the conventional approach of conducting large numbers of crash tests and establishing systems that limit prototyping costs while allowing frequent functional updates.
At the same time, challenges include a war of attrition in the domestic market, regulations and tariffs associated with overseas expansion, and rising quality and repair costs. Japanese companies are being pressed to reform procurement and strengthen their development capabilities. They need strategies to bring new technologies into practical use quickly and deploy diverse powertrain configurations in overseas markets.