U.S. subsidies for electric vehicles are now in the rearview mirror.

On the other side of the world, China continues to support its EV industry and has been for a while. It's poured more than $200 billion into the sector since 2009 and is the biggest market in the world for EVs.  

But having ascended so high, the air is getting thin. The country now finds itself with an oversupply of EVs and EV makers. Competition is cutthroat, and profit margins are thin or nonexistent. As the Chinese EV supply spills over into the rest of the world, some auto industries see it as a threat, and some consumers see it as an opportunity.

Ilaria Mazzocco, senior fellow at the Center for Strategic and International Studies, recently joined “Marketplace Morning Report” host Sabri Ben-Achour to discuss. The following is an edited transcript of their conversation.

Sabri Ben-Achour: So, China has a tsunami-sized supply of electric vehicles. How big of a glut are we talking about?

Ilaria Mazzocco: It's kind of hard to know. You know, if you look at the Chinese market, it's become much larger than anybody expected, right? And that is where, today, most electric vehicles are being sold. However, we are seeing an increasing amount of exports from China, and some of that is probably due to this glut that we're talking about, right? Over competition in China, diminishing margins. There's been a price war that's gone on now for years, and some companies aren't even making profits.

Ben-Achour: How did China get to this point? Why is it swimming in EVs? Why did its industry ascend so rapidly?

Mazzocco: I think it's really a combination of different factors, right? So, you had the Chinese government stepping in and providing pretty comprehensive support, both for suppliers but also for consumers. You had really entrepreneurial companies — companies like BYD that were battery makers before they became car makers. And then you had really the perfect timing. The technology was mature enough, but at the same time, there wasn't that much competition. And I think ultimately, you know, that enabled a lot of competition within China, because a lot of companies decided to sort of step in to produce more EVs. And it turns out consumers really liked them.

Ben-Achour: China sounds like it's kind of supporting a whole industry and eventually letting it consolidate. Is that something the U.S. should be learning from?

Mazzocco: I think what China's experience with industrial policy does teach the U.S. is that it's important to have an ecosystem, having a broader manufacturing innovation ecosystem, having more training, educational investment — all those things can all be really helpful.

Ben-Achour: By shutting Chinese EVs out, even if they do have some subsidization behind them, is that a loss for U.S. consumers?

Mazzocco: Right, and I think actually even moving beyond that, you know, a lot of the components are also made by China. It's not necessarily just the car, but it's also, what about the machinery that makes the battery? Or, what about the IP to extract the critical minerals? How much of that can be Chinese? And I think, for the rest of the world, the answer is a lot more of it can be Chinese than the United States, which is putting the U.S. in sort of a difficult or different position compared to other countries.