China has long been considered not only a highly efficient manufacturing powerhouse, but the “factory of the world” (1) responsible for more than 30% (2) of total industrial output – and its dominance in certain sectors, such as automotive, is a growing cause for concern for stakeholders.
Fully 70% (3) of all new electric vehicles (EVs) now come from China, with Shenzhen-headquartered brand BYD (OTC:BYDDF) outselling (4) Tesla (NASDAQ: TSLA ) and others in sales, and scaling global operations as a result (5). It has automakers like Toyota ( NYSE:TM ) , Honda ( NYSC:HMC ) and Ford ( NYSE:F ) nervous about projects (6) and overhauling strategies (7) , with Ford executives saying even three years ago that China was too far ahead of the game (8).
And a recent visit to one of the Asian powerhouse’s vehicle plants proved it beyond a shadow of a doubt for Honda chairman and CEO Toshihiro Maibe.
“We have no chance against it,” Mibe (9) said on a tour of the Shanghai parts factory, commenting on its smooth automation at all levels of production. All aspects of logistics, procurement and processing were so automated, in fact, that he never encountered a single human worker on the supplier’s floor.
Leaders at Ford (10) and Toyota (11) have expressed similar sentiments about the Chinese manufacturers’ rapid pace not only in building cars, but also in their designs. The nation is known for its smooth development of all kinds of products (12), and its ability to bring vehicles from concept to market in half the time of competitors (13) is an undisputed example.
China’s cheap labor costs, lack of red tape, well-coordinated supply chains, tax exemptions and more (1) have also helped create an unparalleled cost-competitive edge that other industry players incomprehensible (11). And, even investors with money on the line have a right to be scared.
Honda sales within China – once a boon for the manufacturer – have fallen from around 1.6 million new cars in 2020 to just 640,000 in 2025 (14), with the brand expecting to produce fewer than 600,000 vehicles this year at its Chinese facilities, which are operating at just 1% of capacity. Toyota recently reported a year-over-year domestic sales decline in March (16) as homegrown BYD’s lead in the EV sector continues to grow (17).
Canadian Prime Minister Mark Carney’s move in January to massively reduce tariffs on Chinese EVs (18) also puts companies like BYD in danger closer to home.
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Automotive stocks are a common component of many broad-based mutual funds and ETFs (19) — historically even a cornerstone for some (20) — with Tesla perennially serving as one of the more controversial picks.
This week, some experts doubled down on Tesla stock as prices fell, while others warned of a crash. Musk-helmed companies, Ford and Toyota remain among the most popular investment options in the region (21). However, a major shift in focus to the threat of Chinese manufacturing, including disappointing sales numbers, could make the investment feel risky.
While Honda recently revived its shuttered R&D arm (22) in hopes of spurring more innovation, Maybe told reporters in March that the company needed to focus on digitization and fast (23). At the same time, executives announced large “losses related to the reassessment of its automobile electrification strategy” (24) in late March after canceling Honda’s EV projects, including 0 SUV, 0 Sedan, and Afeela models.
Toyota’s CEO has also stated, referring not only to his company but to the industry in general, “Until things change, we will not survive” (25), calling for some major productivity pivots to match Chinese manufacturers. Meanwhile, homegrown EV competitors like Rivian (NASDAQ:RIVN ) and Lucid (NASDAQ: LCID ) (26) are showing promise (27) amid deteriorating conditions elsewhere in the region.
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Investopedia (1), (19); Economist (2); International Energy Agency (3); Autovista24 (4); Financial Post (5); motor1 (6), (15); Dealership Boy (7); Reuters (8), (13); Nikkei Asia (9); CarBuzz (10), (11), (23); LinkedIn (12); Auto Guide (14); Asian News Network (16); Statista (17); Government of Canada (18); ETF Database (20); Motley Fool (21); MSN (22); Honda (24); Yahoo Finance (25); The Globe and Mail (26), (27)
This article originally appeared on Moneywise.com under the headline: ‘We won’t survive’: CEOs of Toyota, Honda and Ford issue chilling warning about China – and how it could affect your portfolio
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
