2023 was the warmest year ever recorded, and large SUV and pickup truck sales reached new records, too, responsible for more than 20 percent of the growth in global energy-related carbon dioxide (CO2) emissions. In the U.S. market alone, more than 12.3 million new SUVs and pickup trucks were sold, which accounted for more than 79 percent of new vehicle sales. The trend has continued in 2024. In the first half of the year, more than 7.3 million SUVs and pickup trucks were sold, up 3.2 percent compared to 2023.
According to International Energy Agency data, if SUVs were a country, they would be the world’s fifth-largest emitter of CO2. Over the course of 2022 and 2023, global oil consumption directly related to SUVs rose by a total of more than 600,000 barrels per day, responsible for more than a quarter of the overall annual growth in oil demand.
By comparison, electric vehicles (EVs), which are a key solution needed to reduce emissions from the transport sector, still only account for roughly one-tenth of total passenger car sales in the United States. In Europe, the sales of new battery-electric cars in the European Union dropped by 12 percent in May this year compared to 2023, led by a 30 percent plunge in Germany, until this year the largest European EV market. Similarly, in the U.S. EV market, Tesla’s California sales plunged 24.1 percent in the second quarter this year.
In contrast to these declining trends in Western markets, in July, China set a new sales record: 50.7 percent of total car sales were either new pure EVs or plug-in hybrids, compared new EVs making up just 7 percent of total vehicle sales in China three years ago. Already at the end of 2022, EV ownership in China had reached 13.1 million units, more than half of the global total. These milestones highlight how fast the world’s largest auto market is outpacing Western counterparts in EV adoption rates.
What are Western governments doing wrong? How did Western carmakers lose their advantage to China, when in the early 2010s, China’s EV industry barely existed?
And even if China is producing too much of the right technologies, with supply outstripping demand—as U.S. and European policymakers contend—then why are Western companies and consumers producing and buying the wrong cars?
In April, U.S. Treasury Secretary Janet Yellen highlighted concerns about China’s excess industrial capacity and overproduction of EVs, which has led to a glut in the global market. This concern led to the US announcing in May that it would impose tariffs of 100 percent on Chinese EVs and 25 percent on EV batteries to protect domestic industries. In August, Canada said it would impose the same tariff to close a potential ‘loophole’ of Chinese EVs entering the U.S. via Canada. Meanwhile, the European Union imposed new tariffs on individual Chinese EV manufactures in July, ranging from 17.4 percent to 37.6 percent, on top of a 10 percent import duty that was already in place for EVs from China.
Arguably, the tariffs are justifiable because China’s multiyear provision of state subsidies to its EV industry creates an uneven playing field in the global market. One estimate shows that from 2009 to 2023, Chinese government support to the EV industry cumulatively totaled $230.9 billion, significantly higher than government support for EVs in the United States and European manufacturing countries such as Germany or France.
China has also implemented a number of significant incentive-based policies to increase adoption of EVs by consumers. For example, financial incentives starting in the 2010s included a subsidy of up to 12,600 renminbi ($1,770) that was paid by the government to anyone who bought certain types of EVs. As the domestic market has matured, though, government support and subsidies have declined, and the direct purchase subsidies for EV consumers were phased out at the end of 2022. There is still a purchase tax exemption in place; new EVs purchased by Dec. 31, 2025, are exempted from the vehicle purchase tax, and EVs bought between Jan. 1, 2026, and Dec. 31, 2027, will have their purchase tax reduced by half.
The juxtaposition of these two issues—China’s extensive manufacturing capacity of EVs and fast uptake in contrast to the United States’ SUV-dominated market—underscores a critical tension in the global push toward sustainable transportation.
On one hand, China is producing more EVs than markets can currently absorb, putting Western competitors under pressure but reflecting a significant commitment to the electrification and decarbonization of the transport sector. On the other hand, the United States continues to indulge in its appetite for gas-guzzling SUVs, undermining global efforts to reduce emissions.
Western countries’ policy frameworks regarding the decarbonization of the automotive industry have several systemic shortcomings. Simply focusing on defensive measures, such as imposing tariffs on Chinese EVs, fails to address the root issues.
Some of the policies that trap consumers and manufacturers in an outdated model date back decades: On the trade policy side, there is the so-called chicken tax, a 25 percent tariff onmost imported pickup trucks, imposed in 1964 (in retaliation for European tariffs on U.S. chicken exports) through an executive order issued by then-U.S. President Lyndon Johnson, which has prevented competitive Asian or European truck makers with better fuel economy from succeeding in the U.S. market. And during the energy crisis in 1978, as part of the 1978 Energy Tax Act, the U.S. Congress established the so-called gas-guzzler tax, as well, requiring automakers to pay between $1,000 and $7,700 for passenger cars such as sedans and station wagons that get less than 22.5 miles per gallon. However, the tax does not apply to SUVs and pickups, which often have much worse gas mileage.
But this isn’t strictly an American issue. In many other countries, there are multiple loopholes that allow for SUVs to receive tax breaks. For example, in Australia, a tax loophole subsidizes imports of U.S.-style “utes” (the Australian term for pickup truck)—a measure that cost Australian taxpayers more than 250 million Australian dollars ($169.6 million in U.S. dollars) in 2023. Similarly, in the United Kingdom, high-polluting cars are taxed at a significantly lower rate, leading to more imports of SUVs and incentivizing consumers to buy cars that are comparatively much worse for the climate.
There are also several issues with the half-hearted attempts of policymakers in promoting and facilitating the shift to EVs. One of the important problems is the lack of consistent, long-term policies and regulations regarding adoption—arguably, it’s been a more of a stop-and-go approach.
For example, fluctuating tax credits and subsidies—such as the U.K.’s previous Conservative Party government deciding in September 2023 to push the phase-out date of internal combustion engine vehicles from 2030 to 2035—have created new uncertainties for consumers and manufacturers alike. Germany abruptly canceled its subsidy for EVs in December 2023 as part of cuts to address the country’s budget crisis. The subsidy program had been in place since 2016 and successfully subsidized 2.1 million EVs, with payouts adding up to around 10 billion euros ($11.1 billion). Since it was canceled, EV sales in Germany dropped, while the share of diesel and petrol cars increased.
All this begs the question: If Western governments cannot afford to financially support their citizens with buying EVs due to budget constraints, then why not let European and U.S. consumers benefit from China’s fiscal spending instead? After all, it’s money that Western governments would not have to shell out.
There are wider questions about the need for closer alignment of national and global vehicle market demands with climate mitigation objectives. According to the U.K.’s Climate Change Commission, global emissions from road transport must fall to essentially zero by 2050 to achieve the Paris Agreement’s temperature goal, and the rapid transition to a fully zero-emission vehicle fleet by midcentury is required. In the short term, the IEA’s updated scenario to keep global warming limited to an increase of 1.5 degrees Celsius (or 2.7 degrees Fahrenheit) requires 66 percent of all new car sales to be EVs by 2030.
Addressing this market imbalance might require not simply letting the manufacturers and consumers decide, but also stronger policy interventions that encourage the adoption of more EVs, more decisively. One of the main issues that policy needs to tackle is that after two decades, many manufacturers are still not being committed to making the shift to EV production. In fact, established global carmakers are not only resistant to transitioning from petrol cars to EVs. Auto industry lobby groups have also actively sabotaged policies designed to decarbonize passenger vehicles. Japanese automakers are the least prepared for an electric vehicle transition and are engaging the hardest against it. These traditional manufacturers prioritize their existing investments in internal combustion engines over embracing the shift to more sustainable transportation options, and they have not made sufficient efforts to convince customers to embrace this necessary change.
Beyond subsidies or tax incentives, which are already provided for EVs in many countries, there are other policy options. It will be important to invest in charging infrastructure development in order to make EVs more practical and accessible to consumers. The Chinese government has been pushing the rollout of charging infrastructure; at the moment, 65 percent of the world’s public EV charging stations are in China.
Governments should also drive research and development as well as advancements in battery technologies, alternative energy sources, and innovative EV components. These policies should focus on driving breakthroughs in battery efficiency, reducing production costs, and exploring sustainable material substitutes.
Finally, education campaigns will be needed to debunk myths—and in particular, growing skepticism—about the performance or reliability of EVs compared to traditional vehicles. Educational campaigns must address these concerns head-on by providing factual information and highlighting the advantages of EVs. Shifting the focus from environmental benefits to personal health and road safety benefits—namely, reducing air pollution and lowering the pedestrian deaths toll—is another area for public education campaigns.
On the consumer side, various issues—the perception of inconvenience, the belief that EVs are less convenient than other vehicles due to charging times and limited range, or concerns about battery life and replacement costs—also need to be addressed.
As the debate around sustainable transportation intensifies, it is becoming increasingly clear that policies supporting the uptake of EVs may not be sufficient on their own. The persistent popularity of SUVs poses a significant challenge to reducing carbon emissions.
Alongside fostering the new, we must actively work to dismantle the old, which would include eliminating some of the support policies that have been in place for decades but are not longer fit for purpose.
However, phasing out SUVs and trucks is not just a technical political challenge, but also a deeply political and social one. Implementing disincentives—such as closing loopholes and higher taxes, imposing stricter emissions regulations, or reducing access for these vehicles to cities and clean air zones—is likely to be controversial and met with resistance from both consumers and the automotive industry.
Nonetheless, policymakers may soon find that they cannot avoid this issue.
China’s rapid EV development demonstrates that fast technological change is not only possible but already happening, marking a stark departure from the gradualism seen in Western markets over the past decade. Holding on to and protecting outdated technologies will not suffice in this new era. Rather than feeling disgruntled or despairing about China’s companies charging ahead, it’s time that Western countries fully embraced the net-zero technologies of the future.
The path forward lies in innovation, technology adoption, and an industry commitment to accelerating the transition to sustainable energy solutions, with governments and decisive policies leading the way.