Over the weekend, former president Donald Trump predicted a “bloodbath” for the U.S. auto industry if he loses the presidential election this November.
He addressed Chinese President Xi Jinping directly at a campaign rally in Ohio, vowing to double the tariff on Chinese cars that come into the U.S. if he is elected.
“We’re going to put a 100% tariff on every single car that comes across the line, and you’re not to going to be able to sell those cars if I get elected,” Trump said Saturday. “Those big monster car manufacturing plants you are building in Mexico right now and you think you are going to get that — not hire Americans and you’re going to sell the car to us? No.”
Spectrum News reached out to iSeeCars.com executive analyst Karl Brauer to explain the current status of Chinese car imports and their prospects for the future. Currently, there are no Chinese-branded cars for sale in the United States.
There are currently four models for sale in the United States that are made in China. The Lincoln Nautilus crossover is built at the Changan Hangzhou Assembly Plant. The Buick Envision crossover is also built in China through a joint venture with General Motors and the Chinese state-owned automaker SAIC.
Geely Holding Group, which purchased the Swedish automaker, Volvo, in 2010, makes the S90 sedans sold in the U.S. at its plant in Daqing. Geely also makes the Polestar 1 and Polestar 2 electric vehicles in Chengdu.
SAIC, based in Shanghai, is China’s largest auto maker. State owned, it sold 5.02 million vehicles in 2023, according to the company’s web site. SAIC has joint ventures with several well-known car companies, including General Motors and Volkswagen.
FAW Group is the second largest state-owned car company in China. It makes about 3.5 million vehicles annually. Founded in 1953, it made the country’s first domestically produced passenger car in 1958. It also has foreign-branded joint ventures with Toyota and Volkswagen.
Dongfeng Motor is the third largest of the Big Four state-owned car companies. It sells about 3.3 million vehicles each year. In addition to Dongfeng-branded vehicles, it has joint ventures with Honda, Nissan and Peugeot Citroen. In 2021, almost 80% of its car sales were with foreign-branded vehicles.
Changan Automobile is the fourth largest, and oldest, state-owned Chinese car maker. It manufacturers about 2.3 million vehicles annually. While many are sold under their own brand, Changan has foreign-branded joint ventures with Ford and Mazda, which make up the majority of its sales.
There are two major avenues that would enable Chinese car companies to sell vehicles in the U.S. They can set up a factories in Mexico that would enable them to sell vehicles through the North American Free Trade Agreement. But there’s a bigger obstacle.
“The biggest challenge that Chinese cars have to be sold in this country isn’t the price or tariffs,” Brauer said. “It’s a lack of a dealer network. There just aren’t any Chinese automakers that have a distribution channel in this country except for Volvo, Polestar and on some level Lincoln and Buick.”
That leaves Chinese auto makers with the difficult task of setting up a dealer network from scratch. More likely, a Chinese car company would partner with an established company that already has a dealer network in place.
Chinese automakers will “absolutely” have an image and perception challenge with American consumers, Brauer said. “But a perception challenge is not going to be enough to hold off the Chinese automakers from starting to gobble up market share in the U.S. as they’re already doing in other markets like Europe.”
The reason is price. Most of the cars made and sold in China right now are priced at less than $20,000, including electric vehicles which can be bought for as little as $10,000. The lowest-priced cars currently sold in the United States are the Nissan Versa, starting at $16,390, and the Mitsubishi Mirage, starting at $16,695. Both run on gas. The lowest-priced EV for sale in the U.S. is the Nissan Leaf, starting at $29,255.
About 3% of the 9.2 million vehicles sold in Europe each year are from Chinese automakers. The percentage is significantly higher for Chinese EVs, which make up 8.4% of the European EV market, according to an independent auto analysis published last year.
About 30% of the cars China exports this year are expected to be electric vehicles, according to UBS.
“If Chinese car companies get all the supply chain and production processes in place to produce cars that get the $7,500 EV tax credit plus have a $20,000 or cheaper entry-level EV, they’re going to rapidly whittle away the current players in the U.S. auto market, both domestic and the other imports,” Brauer said.
It remains to be seen.
“The United Auto Workers and the U.S. auto industry have enough political power that no matter who is in the oval office, there will be an effort to protect it,” Brauer said.
The Inflation Reduction Act of 2022 already has battery sourcing and manufacturing requirements in place to encourage domestic production of electric vehicles in particular.
“If Chinese companies start producing cars in Mexico, which is a free trade country, then the Chinese can sell cars into the United States that are assembled in Mexico and get the $7,500 federal tax credit and undercut U.S. cars,” Brauer said. “So there would potentially need to be another step put in place.”
The timing depends on what protections the U.S. puts in place over the next two years, Brauer said.
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This story was originally published in April 2023.
Chinese automakers are giving US car companies a run for their money, especially as the momentum behind electric vehicles accelerates — and that could force Ford and GM to make some hard decisions.
Other than Tesla, popular US auto brands lost major ground in China last year, the world's largest car market that's critically important to manufacturers. GM's car sales there fell by 20% from 2021, while Ford's declined by 33.5%, according to advisory firm Automobility Ltd.
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"The market has totally changed," Jim Farley, the CEO of Ford, told reporters at an April charity event in Detroit. "We're going to have to rethink what the Ford brand means in a place like China."
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That's especially true as EVs take center stage, Farley said, noting that he has learned the luxury brands that sell only electric vehicles do best in Chinese markets.
Chinese EV-maker market share in China rose by 17% in 2022, while that of foreign automakers dropped by 11%. Some of this can be attributed to Chinese car companies' ability to build better and cheaper cars, especially EVs, that consumers are keen to buy.
"It's pretty much the consensus belief that the US automakers are increasingly irrelevant" in China, Edison Yu, an analyst at Deutsche Bank, told Insider.
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"As we make this transition to EV, the GMs, the Fords in China will really have to be very bold and aggressive to find success," Yu said.
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"At some point, there needs to be either a decision to continue or to pull out," Yu said. "We're at a point where one does need to make a decision on their future."
As the industry bounced back from the Great Recession, and China became the fastest-growing — and most EV-friendly — car market in the world, American car companies rushed to enter the market.
But as political tensions intensify between China and the US, operating in China is starting to become more of a risk for US companies.
Add in the fact that Chinese brands spent the last several years sapping up industry know-how from joint ventures with US brands, and the Chinese market suddenly becomes a much more hostile place for American companies.
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That means that US companies will redouble their EV efforts at home, where they can count on a more reliable and loyal customer base. The one kink in that plan is Elon Musk and his ongoing price war.
"Price wars are breaking out everywhere. Who's going to blink for growth?" Farley said at the event.
While American companies lose ground in China, there is a bright spot. The pandemic forced automakers to make more with less, by shifting their supply chains and focusing on the markets where they make the biggest profit margins.
GM largely led the charge to exit money-losing markets, pulling out of Europe in 2017 and later leaving Russia, India, and Australia. The company still operates in China but is struggling to defend its market share. GM's China sales fell 25% in the first quarter of 2023 after retreating 20% last year.
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The retreat from China and a hyper-focus on the US could be risky.
Making up the difference in Europe isn't likely to be an option for US car companies — Europe's a market that Chinese car makers are already aggressively chasing after, and the competition is increasingly fierce.
While there aren't currently any Chinese car brands for sale in the US, the concern is that eventually, Chinese automakers could eventually make a play to upend the US market.
"What happens in China will not stay in China," Bill Russo, the CEO of Automobility, told Insider in January.