Global competition in auto race accelerating. Michael Dunne an automotive consultant-warned American automakers that they must get a handle on their costs, management layer and inefficiency or risk being unable to compete globally. The author of three books about automotive trends was in the Aug. 15 show “Inside Automotive,” and was a speaker at The Merge 2025, put on by the Alliance for Automotive Innovation.
But the thorniest concern here are the rising clout of Chinese vehicle manufacturers. Once limited and niche domestic companies they have risen to become, and in very many segments now are, leading global manufacturers with immense scale and technology prowess and even more so, ambitious exports plans.
The company cannot rest on their past dominance in the market, Dunne warns: Americans are going to have to learn to make decisions faster, do better in terms of their manufacturing prowess, work better on cost and deal frankly with what the future is and will be for global cars.
1. China’s Long-Term Automotive Strategy
However China’s automotive progress began as a result of a specific and planned industrial policy intended to upgrade its own industries. In fact when Dunne first traveled to China in 1986 it possessed almost none of the capital, technology and know how needed to compete to develop our own industry. In order to encourage a robust local production base therefore policy had to encourage foreign investment whilst simultaneously foster this indigenous capability.
Policies That Strengthened Domestic Manufacturing:
- 100% vehicle import tariffs protected domestic production
- Used-car imports were banned during development
- Joint ventures required Chinese majority ownership
- Foreign automakers invested heavily in local facilities
- Workforce development strengthened domestic automotive expertise
Beginning in the early 1990s, China slapped a 100% duty on auto imports and prohibited imports of used cars. Foreign automakers could only enter the market through joint ventures with locally owned enterprises that maintained the majority of the share in the entity. This significantly pressured foreign manufacturers to build operations in the country rather than just selling vehicles that were imported.
The policies pushed global producers into spending billions of dollars on manufacturing plants, equipment, and training new labor for China. GM, for one, would come to set up 27 full-scale plants there, creating a massive domestic auto industrial complex. This foreign and domestic investment combined with the development of industrial capability gave the Chinese manufacturers increasingly ready access to production learning and skills.
2. China Becomes a Manufacturing Powerhouse
China Is An Automotive Industry behemoth now, currently making about three times the cars as the U.S. It industrializes everything automotive not just the conventional combustion engine but also electric vehicles, batteries, and numerous components and technologies all essential to this automotive sector going forward. All these manufacturing capabilities provide car manufacturers in China enormous production leverage and exposure to crucial automotive technology.
Manufacturing Strength Expands Global Reach:
- Vehicle production exceeds United States output
- Manufacturing spans conventional and electric vehicles
- Battery production strengthens China’s automotive ecosystem
- Exports reach more than 100 countries
- Excess capacity encourages aggressive international expansion
Last year it shipped nearly 6m of the things to more than 100 nations, and it looks set to overtake German and Japanese exporters. Even Chinese factories can turn out way more than this at the moment for the local market to absorb, so this leads to lots of pressure on manufacturers to sell cars somewhere else too.
This excess production is creating the imperative for manufacturers to go global. Jim Farley, the CEO of Ford, has already come to terms with the magnitude of the situation as he noted “this is the first time this industry has seen these kinds of competitive forces” in remarks to Ford leadership. The rise of Chinese car makers is therefore more of an export story than a truly new competitive situation.
3. Chinese Exports Are Accelerating
Dunne summed up the greatest problem facing the industry in stark, understandable terms: “China, China, and China.” five years ago, China was exporting a million vehicles per year, most of them of the more basic variety for developing economies, but in the intervening time its manufacturers have set ambitious export targets and built the capability to compete in a far broader marketplace than before.
Export Growth Reflects Greater Market Flexibility:
- Chinese exports have expanded significantly
- Annual exports could approach eight million vehicles
- Gasoline models remain important to exports
- Plug-in hybrids broaden international market appeal
- Flexible powertrains suit different market conditions
And this year, he says, China is pushing toward an export number in the vicinity of 8 million vehicles. What’s significant there, he notes, is that not about 70% of those cars aren’t clean EVs, but instead gasoline cars or plug-in hybrids, offering a much more flexible portfolio of powertrains.
This strategically gives Chinese automakers more ways to venture into foreign markets and tailor their products and strategy to suit the various needs of local consumers, market infrastructure and demands. In areas with underdeveloped public charging stations and lower consumer appetite for electric cars, they can still push a range of existing conventional and hybrid cars for consumers.
4. A New Level of Global Competition
“Our U.S auto industry is sitting an island of ignorance, and the rest of the world has long since moved on,” Dunne says. “My concern is that American manufacturers will just pay too much attention to what’s going on here at home, while our competitors continue to get positioned everywhere in the world and the large incumbent OEMs may not be prepared for the scale and speed at which global competition will operate.”
Competitive Pressure Is Expanding Globally:
- Chinese brands compete across multiple markets
- Domestic rivalry drives stronger export ambitions
- European markets are seeing growing Chinese presence
- UK sales reflect expanding Chinese competition
- Mexico and Australia are emerging targets
The point he is making is that this is not like the Japanese and Korean expansion of the last two decades. Dunne calls it “15 Japans at once,” alluding to the numerous Chinese companies and products vying with each other for supremacy. The intensity of the fight is forcing the producers to become more innovative, cheaper and look outside of the domestic Chinese market.
It is this strong competition at home, which puts pressure on them to export. In Europe and the rest of the world, Chinese brands have really increased their share, with substantial growing presence in the UK, Mexico and Australia for example. The increased awareness about these competitors puts more traditional companies into competition with a larger size of dynamic players throughout several regions.
5. BYD Shows the Speed of Expansion
BYD’s progress highlights how quickly Chinese auto companies can get into production in. They moved their entire vehicle production from around 400,000 vehicles per year to about 4 million vehicles per year in about four years. This shows what kind of production volumes these Chinese companies can reach once they have enough domestic demand and the Chinese supply chain firms begin to support them.
BYD’s Expansion Highlights Growing Competition:
- Production increased dramatically within four years
- International sales have expanded rapidly
- UK presence has grown significantly
- Chinese brands are gaining market share
- Established automakers face increasing competitive pressure
It’s international growth has been spectacular too, for BYD at least, UK sales have boomed and Chinese brands overall from nowhere (or practically nowhere) now represent a significant share of car sales here and now, this shows the swift expansion that Chinese manufacturers can do in markets long thought to have long had the established brands secured.
“Old Ford VP Peter Fleet is the latest to warn Chinese brands could end up taking up to 30% of UK sales and meanwhile established players like Volkswagen and Honda are suffering at the hands of the Chinese in critical world markets,” points out our source. BYD is not therefore isolated in its challenge but the latest face of a wider competitive change that is sure to change market shares across the globe’s car industry.
6. The Major Pricing Advantage
The pricing of vehicles will be one of the biggest differences between Chinese and Western car companies. Dunne stated that “the average value of exports of Chinese cars is only $19,000 versus a new car in the US it will be something more around the $47,000 level.” This is a significant discrepancy in pricing which could allow Chinese manufacturers a real advantage when competing in cheap, developing countries.
Lower Prices Could Reshape Automotive Competition:
- Chinese exports average around $19,000
- U.S. new vehicles average roughly $47,000
- Affordable pricing attracts cost-conscious buyers
- Modern technology strengthens value for money
- Financing pressures increase demand for affordability
This disparity could become a real disadvantage for older American manufacturers. As consumers are currently contending with pricey vehicles and loans, appealing low-priced alternatives would become increasingly difficult for price-straining manufacturers who would only be unable to meet this to lose clients that already get similar levels of equipment by considerably more modest value point.
The threat of Chinese pricing has also been highlighted by Ryan Kerrigan of Kerrigan Advisors. If Chinese automakers can couple inexpensive pricing with effective technology and equipment, the buyers who are becoming ever more price sensitive could be drawn in, exerting pressure that might force established automakers to revisit their own pricing structures, cost considerations, product plans and value propositions.
7. The “Scale Up, Flood In, Starve Out” Threat
The three-word motto of “Scale up, flood in, starve out,” for example, summarizes Dunne’s understanding of a larger, overarching competitive dynamic. “When factories are subsidized to build big, you can have very low margins domestically and you can flood into the global economy, starving out the local competition because you can accept this for the bigger objective,” he explained.
Potential Effects Of The Competitive Strategy:
- Large production volumes support overseas expansion
- Low margins can enable aggressive pricing
- Market share pressure could affect established manufacturers
- Factory employment could face long-term disruption
- Connected vehicles create additional security concerns
This move could be very disruptive to current manufacturers. A loss of market share over time, this could result in an impact to our factory, tier-1 to 3 suppliers, and our network of dealers in the United States. A continued slow to negative-growth in sales will certainly spillover in all other sectors of an automotive manufacture.
The problem even affects connected car data. Today’s cars-a complex of computers and sensors with internet access-gather vast amounts of location, vehicle and other user data. Sharing that data in cars built by a company affiliated with a strategically important nation-state partner raise national security and intelligence questions. If our future cars continue to be as software-centric as many project them to be, data ownership, use and security could grow into a core element of the competitive clash.
8. Dependence on Critical Supply Chains
There’s also the other threat presented to US: reliance on access to critical materials that don’t ultimately answer to the US-China plays a central role in the refinement of rare earth processing and the production of supermagnets that can drive electric vehicles and other advanced automotive solutions. That focus and concentration presents a considerable weak link to suppliers heavily relying on these components.
Critical Supply Chain Vulnerabilities:
- China dominates rare earth processing capacity
- Specialised magnets support advanced electric motors
- Export restrictions can threaten material availability
- Some restrictions were temporarily paused
- Domestic and allied supply chains need strengthening
On Oct. 30, after the meeting of US President Trump and Chinese President Xi, China said it will postpone the imposed export restriction covering 5 new rare earth metals on earlier of October. This has briefly alleviated the concerns of producers over possible shortages and disruption to its supply chains, although still not without risk on consolidated and long supply chain.
Earlier in 2025 some sanctions dealing with seven different rare earths remained on the books. So, U.S. Automakers still appear to lack any of the capabilities to process those seven, and appear to need better domestic and allied sourcing, the loss of which seems to only get worse as electrification and specialized automobile tech drive demand for exotic materials.
9. Combining Technology With Manufacturing
Dunne believes the United States still has major technological advantages. American companies such as Tesla, Waymo, Zoox, and Nvidia have developed significant capabilities in autonomous driving, software, artificial intelligence, and advanced mobility technology. These strengths provide the United States with important assets as the automotive industry becomes increasingly software-driven.
Technology Must Support Manufacturing Strength:
- Autonomous driving remains an American strength
- Software capabilities support advanced vehicle development
- Artificial intelligence creates new competitive opportunities
- Chinese companies recognise Tesla’s technological influence
- Manufacturing infrastructure must match technological innovation
Chinese automotive leaders from companies such as BYD, Xiaomi, and Xpeng have openly admired Tesla’s position in the global automotive industry. Dunne believes America can use its technological strength as a foundation for competing against China’s manufacturing scale. Combining advanced software with strong vehicle engineering could help American manufacturers develop products capable of competing on both innovation and capability.
Software alone, however, cannot solve the problem. The United States still needs factories, suppliers, skilled workers, and production infrastructure capable of turning technology into competitive vehicles. A strong automotive position therefore requires both technological innovation and the industrial capacity to manufacture those innovations efficiently at scale.
10. Reforming Detroit for Global Competition
Dunne argues that U.S. automakers need to reduce executive management overhead, reconsider expensive legacy labour arrangements, and streamline their internal cost structures. These changes would help companies respond more quickly to global competitors and improve their ability to invest in new technologies. Greater operational efficiency could also give Detroit manufacturers more flexibility when competing against lower-cost international rivals.
Changes Needed To Strengthen Detroit:
- Reduce executive management and operating overhead
- Reconsider costly legacy labour arrangements
- Streamline internal structures and production costs
- Accelerate development of new vehicle technologies
- Adopt faster software-first product development cycles
Trade barriers can provide additional time, but Dunne does not believe protectionism can solve Detroit’s deeper structural problems. Existing measures include a 100% tariff on Chinese vehicle imports, increased from the 25% level used during the Biden administration. Such measures may reduce immediate competitive pressure, but manufacturers still need to address their underlying cost and productivity challenges.
Dunne has suggested controlled market access as another possibility, including a potential quota of 200,000 to 400,000 Chinese vehicles annually. He also urges American automakers to adopt a “Sputnik moment” mindset by accelerating development, shortening product cycles, and embracing software-first vehicle design. The broader objective is to give Detroit enough flexibility to compete through innovation and efficiency rather than relying solely on protection from foreign competition.
