AbstractMotivationStrategies to develop manufacturing industry are the subject of lively debate over whether to follow or defy national comparative advantage. Electric vehicles (EVs), a major change for automobile manufacturers, are no exception.Despite the US government's promotion of global integration to activate the semi‐invisible hand of market forces, neither traditional Detroit automakers nor new firms, even with government grants or loans, were able to launch EVs on the world market promptly, with the notable exception of Tesla. In China, the government helped dozens of domestic electric vehicle manufacturers enter the market through formidable government subsidies. However, none of China's manufacturers, other than Wuling, were able to surpass Tesla in sales in China.The rapid growth of Tesla and Wuling without relying heavily on government protection and subsidies raises the question of whether their success can be attributed to other forms of state intervention.PurposeWhat policies and strategies enable manufacturers to develop and market a new technology, such as EVs? What can we learn by comparing the experiences of US and Chinese vehicle manufacturers?We consider these questions and what the implications are for debates about industrial development strategy.Methods and approachWe compare four carmaking firms—GM, Tesla, BYD, and Wuling—their business strategies and their interactions with the US and Chinese states. We draw on company reports, government documents, and press reports.FindingsBoth China and the US employed semi‐developmentalist, semi‐neoliberal policies to promote the manufacture of EVs. The US subsidized research and development in its automobile industry and provided incentives to consumers. It has subsequently moved to lending to the most promising firms for EV production. China, in contrast, has selectively subsidized EV firms all the way from development to marketing.Subsidies from the US government have been steady: they are expected to stay this way in the near term. However, the fastest‐growing carmakers have used outward foreign direct investment to gain competitive advantage. China's subsidies, on the other hand, have been unstable: linked to the performance of the target firms. The higher the firm's profit, the lower the subsidies and vice versa. China has been careful with subsidies to prevent rent seeking and moral hazard.Neither following nor defying comparative advantage explains the strategies followed by the four firms: comparative advantage considerations have been tempered by the possibilities of foreign investment.Policy implicationsThe results imply that traditional developmental strategies have resorted to inward foreign direct investment in high‐income countries as a means to learn technologies and outward foreign direct investment in low‐ and medium‐income countries as a way to reduce production costs, but have missed the comparative advantage of outward and inward foreign direct investment, and strategic mixes of these, when developing and diffusing radical innovation like EVs.