You Don’t Own a Chinese Car Yet, But You Will

Automobiles are the number two manufactured good sold around the world, after integrated circuits. For all internationally traded products, only crude and refined petroleum are sold more. But unlike most oil-producing nations, the countries that make their own cars and sell them globally are some of the richest, most developed countries in the world—in order of their automobile export values, they are Germany, the U.S., Japan and South Korea.

Anyone who grew up in the 1980s saw the first arrival of the Hyundai Excel. That was South Korea’s entry into the U.S. automobile market. In the ’90s, it was Kia’s turn. Now the two automakers are as ubiquitous on American roads as a Toyota Corolla or a Ford F-150.

China wants in on the action, and it will get there sooner than you think. China will be the new South Korea of autos in 10 years. In fact, don’t be shocked if a Chinese company buys out an American automaker at some point in the near future. But in the overall auto market, the sector Western governments keep talking about as the future is the electric vehicle (EV). This sector is China’s entry point into the U.S. China has already made inroads here for batteries, and its EVs beat American ones in Europe and all of Latin America.

The U.S. Auto Industry Is Drawn to China

As it is, some automakers already known in the U.S. are majority Chinese-owned. For example, MG is owned by Shanghai Automotive Industry Corporation (SAIC), and Geely Motors owns 78.7% of Volvo as of Nov. 17, 2023.

The “Big Two” here in the U.S., Ford and General Motors—all that’s left of the auto industry after the 2008 Great Recession and subsequent consolidation—have been dying to make cars in China and ship them to West Coast ports. Ford said it will be making its new Lincoln Nautilus SUV in China and selling it here. They chose China over Mexico, which has a free trade deal with the U.S. That decision alone should attest to the huge cost advantage of manufacturing cars in China, let alone the economic and political benefits to Ford’s China business if the Chinese government likes them. China surpassed the U.S. as the world’s leading auto market in 2009.

GM has hinted many times, at least since 2015, that they want to make Buick SUVs in China. China is, in fact, Buick’s largest market. Meanwhile, GM has a joint venture with SAIC. In 2022, SAIC-GM exported their 1 millionth vehicle. This is an important relationship for GM; arguably more important than any relationship it has in Mexico.

That’s American legacy companies making cars in China. Now it’s China’s turn to make its own brands and sell them around the world.

EVs Are China’s Way Into the Global Auto Market

Nowhere is China as strongly positioned to do so as with EVs. EVs are China’s Trojan horse into the auto market in this hemisphere. Not only is China the world’s No. 1 producer of EVs; Chinese car battery makers lead the top five thanks to Contemporary Amperex Technology Co. Ltd., better known as CATL. Another Chinese company, BYD, is number three. This company was a big Warren Buffet investment years ago and probably still is. LG of South Korea is sandwiched between the two.

Some might say, “Yeah, but so what? No one is buying EVs.” That might have been true in 2023 in the U.S., but it’s not the case worldwide.

Sales of electric vehicles in 14 countries, including the U.S. and much of Western Europe, totaled 1.243 million units in November 2023, according to Marklines, an auto industry data publisher. This is a 22.5% year-over-year increase and a 11.6% month-over-month increase. The share of EVs sold for the single month of November was 22.7% of all new cars, up 1.8 percentage points from the previous month. It was the highest number of EVs ever sold in a single month, beating December 2022’s 1.171 million units.

If you believe that Western governments are subsidizing EVs and legislating against gas-powered cars (like Gavin Newsom says he wants to do in California), then all of a sudden China’s unheard-of auto market can become a dominant player overnight.

It is worth noting that China’s car companies already produce the top-selling EVs globally in terms of units sold, but this is a skewed figure because China is the world’s biggest auto market, and the government there is pushing EVs on local consumers with an intensity similar to that of a drug dealer.

Despite that, Tesla is No. 1 in terms of units sold worldwide, with the Model Y and Model 3 being the top two bestsellers. But after Tesla, it’s all China makes and models except for the new Volkswagen ID.4, based on 2023 data from CleanTechnica. There is not a single Japanese or South Korean EV in the top 20.

China’s Leading EVs in Latin America

Notably, American car companies seem to have given up on the EV market in Latin America. Ford left Brazil during the COVID years, with no plans to manufacture there again. Germany’s Mercedes-Benz unit closed in Brazil in 2020. By contrast, China has already established a beachhead in several Latin American countries. Geely, BYD and Great Wall Motors, also Chinese, have replaced American companies and invested in assembly lines throughout Latin America.

Brazil: Brazil is Latin America’s largest auto market. EVs are a tiny portion of that market, maybe selling a little over 20,000 units in 2023. For traditional cars, the Chinese are nowhere to be seen yet. But for EVs in Brazil, there is not a single American car company in the pack. Most of the cars are hybrids, plug-ins with an engine, as that type of model is more affordable for Brazilian buyers. Geely’s XC60 Volvo EV is the No. 1 plug-in (PHEV) sold in Brazil. After that, it’s the Tiggo 8 by Chery and the Song Plus by BYD. Of the top 5 PHEV vehicles sold in Brazil, Chinese makes and models come in first, second and third, according to the Brazilian Association of Electric Motor Vehicles. It’s a puny market, but within the battery-powered sector, those plug-ins without a gas engine, Geely and BYD are the top two. Overall, China has 40% of the Brazilian battery-powered market and is building name brand recognition and trust.

Mexico: In Mexico, two of the top five EVs sold are Chinese cars. This includes the expensive Volvo EVs owned by Geely and the lower-end JAC Motors iEV models, which are priced as low as $12,000. You’d have to find a used Nissan Leaf if you wanted to get near that price in the U.S.

JAC’s Mexican director said the EV manufacturer is focused on the local market. “We decided to develop a factory in Mexico for Mexico,” Isidoro Massri, the general manager for JAC Mexico, told Automotive Logistics magazine in December. “We are not focused on exporting, everything that is produced here is produced by Mexico for Mexico.” That’s now, but wait a few years.

Argentina: The Argentina car market is horrible because the economy is a mess, with triple-digit inflation. There is a local EV maker there, but overall the country is a puny market for battery-powered cars and plug-in hybrids. BYD announced in 2017 that it would set up shop there to make EVs. The BYD e5 sedan is sold in Argentina, but its sales are nothing to brag about. Neither are Tesla’s, however.

Where China rules is in buses and trucks. BYD was the first to launch electric buses in Argentina. Foton, a Beijing-based truck manufacturer, is now selling battery-powered trucks in Argentina, fueled by CATL batteries. They chose Argentina to launch this model in the Americas back in March 2023.

Detroit Is Out, Beijing Is In

The U.S. invented the automobile for Main Street. Now the new car companies in the U.S., from Lucid Motors to Rivian, are making cars for millionaires with price points starting at $87,000. This means China has a perfect opening to introduce more affordable EVs to American consumers.

American automakers, including Tesla, that are getting into EVs because of legislation and tax incentives depend on China (or South Korea and Japan) to make their batteries—which are the engine of the EV. With the possible exception of Tesla, American car companies are already being surpassed globally by European, Japanese and South Korean gas-powered cars. Ford, for example, has given up on making four-door sedans thanks to competition from foreign rivals. Other than the Mustang, Ford only makes trucks and SUVs now. And for some American companies, it’s China’s domestic market that keeps them afloat.

In the U.S. today, you’re still about as likely to spot a Chinese-made EV as you are to spot a Fisker Ocean EV (that is, not very likely). But Chinese electric buses are everywhere. BYD USA makes battery-powered buses and is the market leader, signing this segment’s biggest sales order to date with the Los Angeles city government in 2019. Meanwhile, its U.S. competitor, Proterra, filed for bankruptcy in late August.

The EV segment is where China thinks it can stake its claim to be a global producer of future-famous makes and models. Governments in the West are promoting this new car market because of their professed fears of climate change, and we have seen how well China positions itself to reap the benefits of those fears. China rules the solar industry’s entire supply chain, and my guess is that it will surpass Europe with the world’s leading wind turbine brands in five years—barring tariffs, sanctions or domestic subsidies to prop up domestic companies.

Tariffs and quotas keep China’s massive auto market from flooding the zone here. But with new investments and partnerships in Mexico, like JAC Motors, Great Wall Motors, Geely, BYD, SAIC’s MG and Chery, it is only a matter of time before Mexican-made EVs belonging to Chinese car companies will be sold in the U.S.

The U.S. Is Falling Behind in BRICS Countries

The U.S. auto industry is not what it used to be. Within the big five emerging countries—Brazil, Russia, India, China and South Africa, otherwise known as the BRICS—the U.S. auto industry hasn’t had a dominant share in decades. In Brazil, the traditional gas-powered Chevrolet Onix and Onix Plus are in the top 10, along with the Jeep Compass and the Chevy Equinox. Ford’s not a top 10 there anymore.

In Russia, the Chevrolet Niva SUV was number two in sales as of Sept. 2023, but that is the end of American cars in Russia—U.S. companies outright lost their market share because American sanctions against Russia caused these companies to leave the country. Within the top 10, 70% of Russian cars are Chinese brands now.

Even in India, SAIC’s MG Comet EV is the best-selling foreign brand, although the top EVs in India are domestic names from Tata Motors and Mahindra, according to DriveSpark, an India automotive market news publisher. Not a single Western car is in the top 10 in India—neither a gas-powered engine nor the beloved EV.

In 2022, Ford was a top 10 seller in South Africa. China’s Chery is also in the top 10, selling below Ford’s numbers. GM products are not top sellers.

In China, American brands led by Buick and Tesla have given the U.S. automaker a 7.8% market share there. China wants us to return the favor. The real test for China’s market share in the U.S. will be with EVs.

America Is Worried, and With Good Reason

In 2017, Chinese company Geely announced its foray into the PHEV market with the Polestar, then later the fully electric Polestar 2. Production began in 2020 but slowed due to COVID. The car received excellent reviews and looks like a Tesla. Its MSRP is around $59,000, which is a lot more than the Tesla 3, which starts at around $39,000. If it wanted to, China could chop $10,000 off the price just to get into the market and become a direct competitor in the EV luxury sedan space, which for now is Tesla’s turf.

Polestar sold 1,128 units in the U.S. in November 2023 despite tariffs of around 28%. That was a 22.3% jump in sales from November 2022. Even though those numbers are not the sign of a long-term trend for Polestar, Washington is worried about the U.S. auto market’s EV future.

In December, Sen. Marco Rubio (R-FL) announced a bill to block Inflation Reduction Act money and tax credits from going to Chinese EV battery makers. Pressure from Capitol Hill likely forced Ford to put its CATL partnership on pause in September 2023.

Also in December, people in Michigan started complaining about another EV battery maker, this time Gotion Hi-Tech of China, that was building a factory to serve U.S. automakers. That project is in serious jeopardy.

That same month, the Financial Times came out with a story about how Chinese battery makers such as CATL are overproducing batteries—making more batteries than there are cars. The publication was back at it again in January with a story looking at China’s EV supply chain leadership. Their compatriots at The Economist did the same with an article depicting Chinese cars approaching Earth like a meteor shower. They called the onslaught “terrifying.” Well, Western companies did it to themselves. They could have made a battery company at least. No one did, preferring to have the Japanese and South Koreans do it for them. So China joined in and said they’ll make the batteries, process all the minerals that go inside them, and make a bunch of battery-powered cars to sell around the world to rival the Westerners. They’re succeeding.

Everyone in China wants in on the act—private companies, provincially owned companies and the big state-owned ones. They’ll flood the market, lower prices and take market share from the South Koreans and the Japanese and maybe even Tesla, making it next to impossible, if not foolhardy, for an American company to dare enter the EV battery space in particular.

At the very least, if you’re driving an EV like a Ford Lightning or a Tesla, it will soon be powered by a Chinese battery. And in the not-so-distant future, if EVs really do take off in the U.S., Chinese brands will find their way in. If not here, then all over the Americas. Even if the market is small, China will own it.