From ‘slippery slope’ to ‘existential threat’, auto CEOs sound alarm over Chinese competition

Western automakers, from the Big Three to the EV games, offer the same stark warning: Chinese automakers pose a threat to their survival if domestic production is not protected.

“China poses a clear and present threat to the US auto industry,” 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 must maintain the Commerce Department’s Biden-era ban on importing certain technologies and software from China, which effectively bans the import of vehicles from Chinese manufacturers.

In recent comments, corporate executives have driven home a version of this message

Electric vehicle maker Rivian ( RIVN ) has a big year ahead with the release of its entry-level R2. While near-term issues such as cost control and electric vehicle demand are more on the company’s mind, the threat of China is not so far away.

Rivian CEO RJ Scaringe noted that in the long run, two important factors must be recognized.

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

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

Scaringe said the tariffs in place right now “equalize” the cost of those vehicles, protecting U.S. manufacturing. But only for now.

And despite that tariff buffer, Ford ( F ) CEO Jim Farley argued that China’s growing dominance remains a threat.

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

Chinese automakers captured around 6.1% of the European car market last year, a 99% increase from 2024. And that’s despite 35.3% tariffs on Chinese electric vehicles entering the EU; however, plug-in hybrids and full hybrids were excluded.

Farley has previously called Chinese-made cars an “existential threat” to U.S. auto markets, not just because of the country’s technological advances but also because of its labor infrastructure that supports cheap manufacturing.

“They’re a big threat to the workforce locally, they have huge subsidies from the government that they’re exporting,” Farley said. “As a country, we have to decide what is a level playing field.”

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Farley, however, is hedging his bets, with Ford reportedly in talks with China’s Xiaomi ( XIACF ) about an electric vehicle partnership, potentially opening the door to the U.S. market, though 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 grappling with the Canadian government’s trade deal with China to allow 49,000 Chinese-made electric vehicles into the country a year.

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

GM, which has its own business unit in China that includes joint ventures with Chinese automakers such as SAIC, knows the Chinese domestic market firsthand and is justifiably concerned about what Canada’s opening up to Chinese electric vehicles could mean for the auto landscape.

Beyond the US, China is poised to continue to grow and increase its grip on global markets.

The Center for Automotive Research, a Michigan-based industry think tank, warns that “saturation” in China’s domestic market is prompting these 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 – has sounded the alarm about what is happening in the EU after the arrival of imports from China.

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 ) CEO Oliver Blume argued in an opinion piece earlier this month that the EU should use carbon bonuses, or green incentives, for European-made vehicles as a way to meet climate targets and also protect jobs.

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

Pras Subramanian is the lead auto reporter for Yahoo Finance. You can follow it further X and further Instagram.

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