From ‘slippery slope’ to ‘existing threat,’ auto CEOs sound alarm about Chinese competition

Western automakers, from the Big Three to EV pure play, are delivering the same strong warning: Chinese automakers are a threat to their survival if domestic production is not protected.

“China poses a clear and present threat to the auto industry in the United States,” the Alliance for Automotive Innovation (AAI), a trade group representing the Big Three, among other automakers, wrote before a House hearing on Chinese vehicles last December.

AAI said Congress needs to maintain the Commerce Department’s Biden-era ban on the import of certain technology and software from China, which effectively stops the import of vehicles from Chinese manufacturers.

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EV maker Rivian ( RIVN ) has a big year ahead with the launch of its entry-level R2. While short-term issues like cost control and EV demand are more important to the company, the threat of China is not that far away.

The CEO of Rivian RJ Scaringe noted that in the long run, two important factors need to be recognized.

“It’s not like magic is happening on the Chinese cost structure. It’s really two things that you can track very clearly,” Scaringe told Yahoo Finance last week. “One is their capital cost structure is much lower than ours. In most cases, it’s close to zero. It’s a heavily subsidized industry where the manufacturing plants and compacts are paid for by the local equivalent of the federal government.”

The second factor is labor, with Chinese automakers’ costs a quarter to a fifth of those faced by American companies.

Scaringe said that currently, the tariffs in place “equalize” the cost of those vehicles, and protect US manufacturing. But only for now.

And despite this tariff buffer, Ford CEO (F) Jim Farley claimed that China’s increasing dominance is still a threat.

“We’re a year down the road with Chinese competitors. Now they’re even more prominent around the world. Not a lot here in the US, but you go to Europe, you go anywhere else, China is a big deal,” Farley told Yahoo Finance in January.

Chinese car manufacturers captured about 6.1% of the European car market last year, a jump of 99% by 2024. And this despite tariffs of 35.3% on Chinese EVs entering the EU; however, plug-in hybrids and full hybrids were excluded.

Farley has in the past called Chinese-made cars an “existential threat” to US automarkets, not only because of the country’s technological advances, but also for its labor infrastructure that supports cheap manufacturing.

“They pose a lot of threat to the job locally, they have huge subsidies from the government that they are exporting,” said Farley. “As a country, we have to decide what is a fair playing field.”

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Farley, however, is hedging his bets, with Ford reportedly in talks with China’s Xiaomi (XIACF) about an EV partnership, potentially opening the door to the US market, although both Ford and Xiaomi dispute the report. The Wall Street Journal reported that Ford and BYD ( BYDDY ) were also discussing a battery deal.

At General Motors (GM), CEO Mary Barra is reaching for the Canadian government’s trade deal with China to allow 49,000 Chinese-made EVs a year in the country.

“I can’t explain why the decision was made in Canada,” she said at an event for GM employees. “It becomes a very slippery slope,” she added, alluding to the competitive threat posed by Chinese firms.

GM, which has its own China business unit that includes joint ventures with Chinese automakers such as SAIC, has first-hand knowledge of the cutthroat Chinese domestic market and is justifiably concerned about what Canada opening the door to Chinese EVs could mean for the automotive landscape.

Beyond the United States, China is poised to continue growing and increasing its control over global markets.

The Center for Automotive Research, a Michigan-based industry think tank, warns that “saturation” in China’s domestic market is driving those automakers to aggressively expand into global markets such as Canada and South American countries such as Brazil.

Stellantis (STLA) — the most Euro-centric of the Big Three — raised the alarm about what is happening in the EU after the arrival of Chinese imports.

CEO Antonio Filosa and other European partners are proactively trying to guide future legislation to boost local production and sales in the face of cheaper Chinese competition.

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Filosa and Porsche ( P911.DE ) Chief Executive Oliver Blume argued in an opinion piece earlier this month that the EU should use carbon dioxide bonuses or green incentives for vehicles made in Europe as a way to meet climate targets and also protect jobs.

“Europe is witnessing the emergence of new geopolitical rivalries,” wrote Filosa and Blume. “Trade, technology, and industrial capacities are being mobilized more than ever to serve national interests. The European Union must choose its path quickly.”

Pras Subramanian is Lead Auto Reporter for Yahoo Finance. You can follow it on X and on Instagram.

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