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

Western automakers, from the Big Three to electric vehicles, are issuing the same stark warning: Chinese automakers pose a threat to their survival unless domestic production is 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 last December ahead of a House hearing on Chinese vehicles.

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

In recent comments, company executives have conjured up a version of this message

EV maker Rivian (RIVN) has a big year ahead with the launch of the entry-level R2. Although short-term issues such as cost control and EV demand are on the company’s agenda, the Chinese threat is not that far away.

Rivian CEO RJ Scaringe stated that two important factors should be taken into account in the long term.

“There’s no magic to China’s cost structure. There are two things you can really track very clearly,” Scaringe told Yahoo Finance last week. “First, their capital cost structure is much lower than ours. In many cases, it’s close to zero. This is a highly subsidized industry, with facilities and manufacturing compacts paid for by the local equivalent of the federal government.”

The second factor is labor; Costs for Chinese automakers are one-quarter to one-fifth of those faced by U.S. companies.

Scaringe said the tariffs currently in effect “equalize” the cost of these vehicles and protect U.S. production. But only for now.

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

“We’re on track for another year with Chinese competitors. They’re more prominent around the world now. Not so much in the U.S., but you go to Europe, you go anywhere else, China is a big thing,” Farley told Yahoo Finance in January.

Chinese automakers caught approx. 6.1% of the European car market last yearA 99% increase from 2024. And this despite 35.3% tariffs on Chinese electric vehicles entering the EU; however, plug-in hybrids and full hybrids were excluded.

Farley has commented on Chinese-made cars in the pastexistential threat” to U.S. auto markets not only because of the country’s technological advances but also because of the labor infrastructure that supports cheap production.

“They pose a huge threat to the local workforce, they receive huge subsidies from the government they export,” Farley said. “As a country, we need to decide what a fair playing field is.”

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But Farley is hedging his bets; Ford is reportedly in talks with China’s Xiaomi (XIACF) about an EV partnership, potentially opening the door to the US market, but both Ford and Xiaomi dispute the report. Wall Street Magazine Ford and BYD (BYDDY) are also reportedly discussing a battery deal.

Mary Barra, CEO of General Motors (GM), is concerned about the Canadian government’s trade deal with China, which allows 49,000 Chinese-made electric vehicles to enter the country annually.

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

GM, which has its own China business unit that includes joint ventures with Chinese automakers such as SAIC, has firsthand knowledge of the cutthroat nature of China’s domestic market and is rightfully concerned about what Canada opening its door to Chinese EVs could mean for the auto world.

Beyond the United States, China is also poised to grow and increase its dominance in global markets.

The Center for Automotive Research, an industry think tank based in Michigan, China warns of “saturation” in domestic market This is pushing automakers to aggressively expand into global markets like Canada and South American countries like Brazil.

Stellantis (STLA), the most Europe-centric of the Big Three, has been alarmed by what is happening in the EU following the arrival of Chinese imports.

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

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Oliver Blume, CEO of Filosa and Porsche (P911.DE) was discussed in a column earlier this month He said the EU should use carbon dioxide bonuses or green incentives for vehicles produced in Europe as a way to meet climate targets and protect jobs at the same time.

“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 quickly choose its path.”

Pras Subramanian is Yahoo Finance’s Chief Auto Correspondent. you can follow it X and on instagram.

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