(Bloomberg) -- Ten years ago almost to the day, while checking out a handful of luxury sedans from one of China’s largest automakers SAIC Motor Corp., President Xi Jinping gave a pivotal speech that would set China on the course to dominate the electric vehicle industry.

The path to becoming a strong automaking nation lies in developing new-energy vehicles, Xi said, according to a 2014 Xinhua report. Claiming a head start, or “high ground,” in this sector is key to the competition globally, Xi said.  

In 2014, China sold around 75,000 EVs and hybrids, and exported about 533,000 cars. The domestic market was dominated by international manufacturers such as Volkswagen AG and General Motors Co., which were allowed to enter by forming joint ventures with local players in the 1980s and 1990s. This helped China transform from a bike-riding nation to a car-driving one. Homegrown carmakers and brands that didn’t work with foreign partners were seen as inferior and lagging behind in engine and other automotive technology.

To get ahead and tackle environmental challenges, Beijing bet on fuel efficient and alternative energy vehicles. The state had published a guideline in 2012 that established ways to develop the industry by setting sales goals, providing subsidies and allocating resources for building charging infrastructure, among other things. Xi’s speech two years later signaled China’s determination to use this as a way leapfrog traditional Western and Asian auto powerhouses, in particular Japan, home to Toyota Motor Corp.

With the stage set, China needed a catalyst to spur consumer interest in EVs, which in the early 2010s were mostly cheap cars with short ranges. That ended up being Tesla Inc., which became the first foreign automaker to set up a wholly owned operation in China. With that special permission, Tesla completed its Shanghai factory in 2019. Its entry into the market motivated local players to come up with better EVs with longer ranges.

Fast forward to 2024, and China has become the world’s largest auto market and sells more electrified vehicles than any other country, with 9.5 million cars delivered last year. It also controls the majority of the battery supply chain. Homegrown champion BYD Co. dethroned Volkswagen to become the best-selling brand in China and in the last quarter of 2023, surpassed Tesla as the world’s largest producer of EVs. China also overtook Japan as the largest auto exporter, sending 4.14 million units abroad with 1.55 million of them being EVs or plug-in hybrids.

Read More: China’s Stranglehold on EV Supply Chain Will Be Tough to Break

The achievements proved that Beijing’s industrial policy and investments paid off. But they’re also adding to tensions with the West. China’s success in EVs, which could disrupt traditional auto supply chains that employ millions of people, has become a key source of discomfort in Washington and Brussels.

As a price war at home and slowing growth drives Chinese automakers to search for buyers for its affordable and tech-laden EVs elsewhere, they’re running into trade barriers, especially in the EU and the US, which are meanwhile trying to develop their own EV supply chains. Both have accused China of exporting its excess capacity.

The US has quadrupled import tariffs on Chinese cars to more than 100%, while the EU is investigating Chinese EVs to see if there has been an unfair advantage from government subsidies. Brazil recently removed a tax break on imported EVs and even Russia, arguably Beijing’s strongest ally and the largest destination for Chinese auto exports since the war with Ukraine, has asked Chinese carmakers to consider localizing production.

Beijing has threatened to hit back, with the China Chamber of Commerce to the EU on May 22 saying that the import tariffs on cars with large engines may be raised to 25% from 15%. There’s a June 5 deadline for the EU to inform Chinese EV exporters of preliminary findings and whether tariffs will be imposed.

SAIC, the state-owned manufacturer whose facility Xi visited 10 years ago, happens to be one of the three Chinese automakers, along with BYD and Zhejiang Geely Holding Group Co., selected for further scrutiny by the EU in its anti-subsidy investigation. SAIC owns the British-origin MG brand, which is one of the top selling EVs in Europe.

At an event marking the 10th anniversary of Xi’s speech on Friday, SAIC officials including Chief Engineer Zu Sijie said they’ve remembered the president’s instructions well, and the company has consistently innovated around technologies like smart driving and connected cars.

Li Zheng, the co-founder of SAIC Qingtao New Energy Technology Co., a battery startup backed by SAIC, took the opportunity to promise executives won’t be complacent as EV competition rises, noting that progress in solid-state batteries, which have a higher energy density and reduced fire risk, will be one way for China to maintain its edge.

“New-energy vehicles have become a strategic industry, fiercely contested by countries around world,” Li said. “They’re a key supporting force to our country’s revitalization of green sectors.”

A lot can happen in 10 years, but with SAIC having invested about 150 billion yuan ($21 billion) into R&D over the past decade alone, even despite trade wars, 2034 looks bright. 

--With assistance from Jinshan Hong.

©2024 Bloomberg L.P.