This is a bad argument because you're assuming that the US needs to compete with China on EVs or that not competing results in somehow "losing". A car is a car, at the end of the day. Frankly, the best car is no car, but I'll leave that for some other discussion around transit.
China has gone all-in on EVs because over the years they smartly built up the world's best rare earth refining capabilities and immense manufacturing prowess while the United States has undoubtedly secured the global oil supply (remember tanks and fighter jets to fight wars aren't running on batteries) which, even amongst the doomiest of doomers will last quite a while.
China was never going to be an oil-producing powerhouse, but it did have the ability to leverage alternative energy sources so that it wasn't quite as beholden to the petrodollar institution, so that is what they did. And of course running cars on batteries and doing so at a very cheap cost makes sense there.
Meanwhile, the US can obviously produce good cars at a good enough price and with cheap oil for the foreseeable future it's hard to argue in favor of EVs as a national policy. What, we're going to switch to EVs? Who is going to build them? Tesla? We don't have access to the rare earth refining capabilities to meet demand. It's just physics. And if China is using less oil, that means more for the United States and others.
As you said, China has taken these actions out of self interest, but the self interest isn't "clean environment" or anything like that, it's just down to being not as reliant on the US for energy. Though that's a nice benefit. I do own an EV and I think the driving experience is superior but geopolitically things seem to be trending in a different direction.