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

From the Big Three to EV pure plays, Western automakers are sounding the same stark warning: Chinese automakers face a threat to their existence if domestic production is not protected.

“China poses a clear and present threat to the U.S. auto industry,” the trade group Alliance for Automotive Innovation (AAI), which represents 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 importing certain technology and software from China, which effectively bars vehicle imports from Chinese manufacturers.

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

EV maker Rivian ( RIVN ) is having a big year with the launch of its entry-level R2. While short-term issues such as cost containment and EV demand are top of mind for the company, the China threat is not so far away.

Rivian CEO RJ Scaringe commented that in the long term, two important factors need to be identified.

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

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

Scaringe said at the time, tariffs in place would “equalize” the cost of those vehicles, protecting American manufacturing. 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 a year away from the Chinese rivals. They’re now more prominent around the world. Not so much here in the U.S., but you go to Europe, you go anywhere else, China is a big deal,” Farley told Yahoo Finance in January.

Chinese automakers captured about 6.1% of the European auto market last year, a 99% jump from 2024. And this despite a tariff of 35.3% on Chinese EVs entering the EU; However, plug-in hybrids and full hybrids were excluded.

Farley has called Chinese cars an “existential threat” to U.S. automakers in the past, not only because of the country’s technological advances, but also because of the labor infrastructure that supports cheap manufacturing.

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

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However, with Ford reportedly in talks with China’s Xiaomi ( XIACF ) for an EV partnership, potentially opening the door to the US market, Farley is hedging his bets, 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 touting the Canadian government’s trade deal with China to allow 49,000 Chinese-made EVs to enter the country per year.

“I can’t explain why this 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 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 it could mean for the auto landscape when Canada opens its doors to Chinese EVs.

Beyond the US, China is poised to expand and expand its grip on global markets.

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

Stellantis ( STLA ) – the most Euro-focused of the Big Three – sounded the alarm over what was happening in the EU after the influx of Chinese imports.

CEO Antonio Filosa and other European partners are actively 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 op-ed earlier this month that the EU should use carbon dioxide bonuses or green incentives for vehicles made in Europe to meet climate targets and protect jobs.

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

Pras Subramaniam is the chief auto reporter for Yahoo Finance. You can follow him X and in Instagram.

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