Not long ago this question would have been unthinkable, but these days it’s relevant and timely. There’s an even better question that needs to be asked: Can China take over the global auto industry? Increasingly, this is starting to look like a real possibility. And if they do, every country will feel the effects.

The latest U.S. vehicles are safer, more efficient, and more reliable than those we grew up with. And it’s not just the vehicles that have changed. The industry has become much leaner and more competitive than it was years ago.

According to AI Overview, there were thousands of auto companies in the U.S. between 1900 and 1929. Most of them fell by the wayside or became part of “industry consolidation.” In 1929, only 44 U.S. companies were still manufacturing autos.

These days the auto industry in the West and parts of Asia is controlled by a handful of industry behemoths, and they don’t want any new competitors encroaching on “their” territory.

 

Ready To Rumble

But somebody forgot to tell that to the Chinese, who have decided to compete against some of the most powerful corporations in the world. And to the distress of competitors and the amazement of consumers, they are making incredible inroads in countries around the world.

According to AI Overview, “China has already overtaken Japan and Germany to become the world’s largest auto exporter, producing over 30 million vehicles a year. Driven by massive domestic overcapacity, advanced electric vehicle (EV) supply chains and fast software innovation, Chinese brands are rapidly reshaping global markets.” What makes these milestones even more impressive is that they were achieved despite the significant tariffs and other trade barriers placed on them in major markets such as the U.S.

 

Numbers Talk

Numbers can tell a story as well as words can, and the story they are telling is rattling the auto industry and its shareholders.

Five years ago, China exported about a million cars. According to Latitude Media, a B2B media company focused on clean energy and the global energy transition, this year will be better, much better. In fact, China is on track to export 12 million vehicles. If they do, that would be more than Japan or Germany ever shipped at their peaks. “No country has ever scaled car exports that fast and almost none of (their cars) are in the US.” That means that huge untapped markets can potentially boost their sales significantly.

China doesn’t export cars to the U.S. due to political tensions. On May 14, 2024, then-Pres. Biden raised tariffs on Chinese vehicles from 25% to 100%. According to Latitude Media, that effectively keeps Chinese cars off American roads.

So most Americans see the threat posed by Chinese cars as only theoretical. “But everywhere else, Chinese automakers are reshaping markets across Europe, Southeast Asia, Latin America – essentially the entire world except the U.S.,” it adds.

Michael Dunne, head of the San Diego-based advisory and market intelligence firm Dunne Insights, has spent decades tracking the global auto industry, and he is very concerned about the threat China poses to the U.S. auto industry. “It is real, giant, ruthless and like a meteor from outer space heading to the U.S.,” he said.

 

“Killer Playbook”

According to Dunne, China uses a “killer” strategy they’ve successfully applied to industry after industry for decades. For example, in the 1980s their goal was to dominate the manufacture of buttons. “They built massive capacity inside China, the competition there was brutal, and then they exported globally,” he said. Since then, they have used the same strategy in steel, solar panels, drones, and now are repeating that strategy with autos.

In brief, their strategy calls for building massive capacity and for the numerous companies in the industries they target to engage in brutal price wars with each other. This creates the incentive to export as much as they can. “That’s exactly what we’re seeing with cars today,” Dunne says. China has enough manufacturing capacity to supply cars to half of the world. Will they let that capacity go untapped?

 

The Last Barrier

In 2024, the U.S. placed a 100% tariff on EVs imported from China; overnight, those vehicles became unaffordable for many motorists. This strategy was supported for a time by Canada, which also placed a 100% tariff on those same vehicles.

But Canadian Prime Minister Mark Carney very recently changed this policy and now welcomes Chinese EV imports. Mexico has a 50% tariff on these vehicles, which unquestionably is steep, but according to Dunne, it’s one that China feels it can deal with. The bottom line: The U.S. is the only major nation effectively blocking imports of Chinese cars.

Interestingly, China is grabbing market share in many foreign markets by pursuing a strategy once considered anathema to them: capitalism. Currently, there are more than 60 automakers in China who manufacture more than 100 brands, and only the fittest survive this intense competition.

 

Disadvantages, Advantages

Chinese automakers must overcome major barriers to enter the U.S. market. Aside from the 100% tariff, they have no dealer networks and face intense political opposition and competition from powerful domestic manufacturers. In addition, there are national security concerns and regulatory hurdles blocking them.

But China also enjoys significant advantages, and one of the most important of these is significantly lower costs. For example, an EV can be manufactured and sold in China for less than $10,000. According to Dunne, that’s 30%-40% less than it would cost in Europe or the U.S. China’s lower cost structure is why half of Tesla’s global production is made there. By comparison, there are only a handful of car companies in Detroit and Japan, and they don’t compete with each other nearly as intensely.

Also, China is focusing its efforts on underpricing the competition. That’s why EVs, which made up only 5% of their auto market in 2020, today account for more than half of that and appear to be heading higher.

Dunne says that during promotions, the Chinese BYD Seagull can be purchased for $8,000 or less, with the manufacturing cost approximately $7,000. Margins are super thin compared to other manufacturers, but Chinese manufacturers have scale, competitiveness, and offer great products. “They’re not making much money, but they’re selling cars like crazy,” he says.

There’s one more thing Chinese car companies have going for them: the backing of the ruling Communist Party (CCP). Their failure would not only be a huge business disappointment, but it would probably bruise their honor as well.

So far, that’s not been a problem. Detroit has faced very tough challenges from European auto manufacturers, Japan, and Korea, and while they’ve taken their hits, they’re still alive and kicking. China will likely be their toughest battle. Let’s hope Detroit can score another victory, because the alternative would be bad news for America’s economy, workers, and stock market. And that’s the last thing we need!

Gerald Harris is a financial and feature writer. Gerald can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.