The U.S. as well as Europe should definitely shift subsidies away from fossil fuels to renewables, and their industries could technologically keep up with China's. However, it wouldn't solve the problem here imo, as China has a structural overcapacity across the whole supply chain.
In a nutshell, China will do everything to flood the market with ever cheaper products. Its state policy has always been incentivizing lower prices for larger market share, but this policy has reached unprecedented levels (and not just in EV car market, btw.).
A major reason for this is Beijing's bias against a 'social welfare' state for the benefit of industry subsidies. During the pandemic, the government provided high company subsidies to keep people employed, but no household support (which left and is still leaving domestic consumption low). The federal and local governments provided their subsidies irrespective of firms' profitability. Knowing that the Chinese state-planned system traditionally rewards the mentioned scale of business over financial health, firms increased their production capacities even more, hoping to compensate lower margins with volume.
The result is now a massive and increasing overcapacity that can't be absorbed by the domestic market.