China's great electric leap forward

China's sales of EVs are set to surpass the total sales of passenger cars in the US. And it's not just that fact that should make the likes of Elon Musk reach for his steering wheel. Of the 22 million EVs projected to be sold this year, two-thirds are likely to be in China. This demonstrates an increasing alignment between climate goals and markets, the gold standard of all responsible businesses. Strong policy support, such as fuel economy and CO2 standards, along with fiscal incentives, are helping to drive demand, which, in turn, have helped create this climate-market sync. The largest automobile market in the world is clearly proving that what is good for the planet can also be good for business.

Policy support is critical for clean tech to be readily accepted and thrive, especially since upfront cost of climate tech solutions like EV is high. Changes in levels of such support can translate quickly into sales. Take Europe, where EV sales growth has stagnated as several major markets phased out or reduced subsidies while regulatory requirements remained stagnant. CO2 targets for cars in the EU remained the same between 2023 and 2024. In the US, where the Trump regime's proposed cuts to EV tax credits will likely see a steep drop in EV sales by 2030, EVs are now to account for 27% of total car sales, down from earlier projections of 48%.

There's a Chinese lesson for countries like India with high and growing domestic demand to make the shift: support through fiscal and policy interventions can pay off. With China now dominating the global EV ecosystem, this should make it easier for India to make the necessary 'gear shift'. The longer India waits, though, the more it will have to contend with overcapacity of China's EV industry.