On July 5, 2023, at the Hongqi Prosperity Factory of China FAW Group in Changchun, Jilin Province, new energy vehicle bodies moved orderly along the production line. The strategic pullback by American automakers in the electric vehicle sector is raising growing concerns about a survival crisis for the U.S. auto industry. In contrast, Chinese automakers are making significant strides in the technology widely seen as defining the next era of automobiles.
A stark warning emerged recently when Stellantis disclosed substantial impairment losses of $26 billion, linked to a major business restructuring that includes scaling back its EV operations, causing its stock price to plummet over 20%. CEO Antonio Filosa attributed the loss to overestimating the pace of the energy transition.
Prior to this, several U.S. automakers had already significantly reduced their pure electric vehicle businesses, shifting focus back to high-displacement internal combustion engine vehicles like the Ford F-150 pickup truck and large SUVs such as the Chevrolet Suburban. Chinese automakers have adopted the opposite strategy, centering their efforts on electric vehicles and accelerating their global market expansion.
Legacy automakers like General Motors and Ford have incurred billions in losses from their EV ventures. This strategic retreat is partly due to the expiration of federal tax credits and tepid consumer demand for electric vehicles.
Even Tesla, the pioneer of the modern EV industry, is under significant pressure. Under Elon Musk's leadership, Tesla has seen its appeal and market share in Europe decline this year, with its EV sales overtaken by Chinese automaker BYD COMPANY, which continues to expand its exports across Europe and globally. Recently, Tesla announced it would discontinue its two oldest, lowest-volume models—the Model S and Model X—repurposing a U.S. factory for production of its Optimus humanoid robot.
Musk, long a leader in electrification, appears to be shifting his focus towards other ventures, particularly robotics, autonomous taxis, and his AI company, which recently merged with SpaceX in one of the largest corporate deals in history.
Concurrently, the global market share of Chinese automotive brands has surged nearly 70% over five years. Many experts view this as a threat to U.S. automakers, including the potential for Chinese brands to enter the U.S. market.
There is widespread concern among global automakers that Chinese competitors like BYD COMPANY and GEELY AUTO could flood international markets with products, disrupting local automotive manufacturing and depressing vehicle prices. The U.S. has implemented protectionist measures, imposing a 100% tariff on Chinese EV imports, yet Chinese automakers have successfully entered markets in Europe, South America, and elsewhere.
The auto industry contributes approximately 5% to the U.S. GDP, and American companies are growing increasingly worried about the long-term implications of this trend. Several automotive experts have used the term "existential" when discussing the rise of Chinese automakers.
Elizabeth Krear, CEO of the Center for Automotive Research, stated, "The existential risk to the U.S. auto industry isn't just Chinese EVs; it's the combination of sustained government support, vertically integrated supply chains, and efficient execution by Chinese automakers. These advantages lower production costs and speed up implementation. Furthermore, saturation in China's domestic market is pushing these companies to expand aggressively globally."
The Rise of China's Auto Industry Since 2023, China's auto industry has rapidly transformed from a relatively closed sector into the world's largest vehicle exporter. Experts attribute this rapid development to government funding, a domestically cultivated culture of innovation, and an efficient work pace. Slowing growth in the domestic market and underutilized factory capacity have also compelled companies to export to major global automotive markets.
According to GlobalData, the growth in global sales of Chinese EVs is particularly staggering, increasing nearly 800%. This is primarily driven by domestic Chinese EV sales rising from approximately 572,300 units in 2020 to 4.95 million in 2025. Overseas sales of Chinese EVs exploded by over 1300%, from under 33,000 units to more than 474,000.
Data from S&P Global Mobility shows that as China's auto industry ascends, the combined global market share of Detroit's "Big Three"—General Motors, Ford, and Stellantis (the parent of the former Chrysler)—has declined from 21.4% in 2019 to a projected 15.7% in 2025. In contrast, the combined global market share of China's leading automakers, BYD COMPANY and GEELY AUTO, is projected to grow from under 3% to 11.1% by 2025.
Recent expansion plans announced by Chinese automakers target Canada, a smaller automotive market that has rescinded its 100% tariff on Chinese car imports amid trade disputes with the U.S. administration. Chinese automakers have already achieved rapid growth in lower-income, less mature automotive markets in South America, India, and Mexico—regions historically considered growth markets for U.S. automakers. According to Dataforce, Chinese brands have also successfully entered the European market, increasing their share from nearly zero in 2020 to almost 10% by December 2025.
Al Bedwell, Global Director of Powertrain at GlobalData, noted, "Electrification has played into the hands of Chinese automakers because they have products that meet market needs. It's the electric vehicle segment that has opened the global door for Chinese automakers; otherwise, this wouldn't be happening." Bedwell added that China, lacking substantial oil reserves, has long sought to reduce its dependence on oil, stating, "China saw an opportunity to become a leader."
GlobalData forecasts that global sales of Chinese EVs will continue growing to approximately 6.5 million by 2030 and near 8.5 million by 2035. This includes anticipated growth in the U.S. market, where several China-made models like the Buick Envision have already been introduced.
Stephanie Brinley, Principal Automotive Analyst at S&P Global Mobility, commented, "Achieving sustained success in the U.S. market is difficult; it takes time, investment, patience, and a willingness to experiment with products and refine them until they meet market demands. It's expected that some Chinese automakers will possess these traits and ultimately seek to enter the U.S. market." Brinley pointed out that it took Toyota from 1957 until 2001 to capture 10% of the U.S. market, and Hyundai achieved a 10% share in 2022 after 26 years of effort.
Brinley stated, "The U.S. is a mature market, with annual sales expected to remain stable between 16 and 16.5 million units until at least 2035. New entrants would have to take share from existing brands and automakers. How quickly Chinese automakers can win acceptance from American consumers, and which U.S. automakers might lose sales and share as a result, remains to be seen."
The Alliance for Automotive Innovation, a lobbying group representing nearly all U.S. automakers, is attempting to prevent this scenario. Last December, the alliance urged the U.S. Congress and administration to block Chinese government-supported automakers and advanced battery manufacturers from establishing factories in the United States.
In a statement to a House select committee, the alliance's CEO, John Bozzella, said, "Automakers operating in the U.S. are facing geopolitical and market pressures from China that directly threaten U.S. global competitiveness and national security." He also cited alleged unfair, anti-competitive trade practices and intellectual property theft by China.
The State of the U.S. EV Industry During the previous administration, automakers invested billions in developing and launching EVs, spurred by regulations and incentives. The current administration has largely reversed these policies. Regulatory rollbacks have allowed automakers to de-emphasize their pure-electric vehicle development plans.
General Motors and Ford alone recently announced over $27 billion in impairment charges related to scaling back their EV businesses, including canceling new models and reducing production of existing ones. Recently, Jeep maker Stellantis reported a loss of €22 billion (approximately $26 billion) due to a transformation plan that includes scaling back electrification and reintroducing V8 engines in U.S. models.
According to Cox Automotive, U.S. EV sales peaked in September of last year, reaching 10.3% of the new vehicle market just before federal incentives expired. Preliminary estimates for the fourth quarter showed that share had plummeted to 5.2%.
Recently, General Motors CFO Paul Jacobson stated that the Detroit giant, now largely a North American regional player, is not abandoning EVs but is scaling its business to match natural market demand rather than expanding blindly to meet regulatory mandates. When asked about the global expansion of Chinese automakers, Jacobson said GM is "capable of competing," but only on a level playing field—reiterating that U.S. tariffs should offset subsidies Chinese companies receive from their government. Speaking at a Chicago Fed automotive conference in Detroit, Jacobson said, "Chinese automakers' products introduce a new level of competitive intensity and capability, so we must be prepared."
GM, which relied on China as its largest market from 2010 to 2023, was unprepared for the rise of the domestic Chinese auto industry. As Chinese manufacturing prowess grew, GM's annual profits in China fell from around $2 billion in 2018 to a second consecutive year of losses in 2025.
GM's crosstown rival, Ford, has taken a different approach. The company has largely abandoned plans for large EVs, instead focusing on a new generation of smaller electric vehicles. Ford CEO Jim Farley believes this will be the company's "lifeline" against Chinese competitors. Farley, who has repeatedly praised Chinese automakers, said this new product platform will create a simple, efficient, and flexible ecosystem for a series of affordable, software-defined electric vehicles.
Farly said last year, "This is a Model T moment for the company. We explicitly see Chinese automakers as the core competitors for the next generation of EVs, not other global automakers. Companies like GEELY AUTO and BYD COMPANY are our benchmarks... Our vehicle development is based on this positioning."
From Auto Manufacturing to Automation U.S. EV startups like Rivian and the Saudi-backed Lotus Group, which manufacture all their vehicles in the U.S., now face challenges with profitability and sales volumes. Due to weak demand, these startups are emulating Tesla by positioning themselves as technology companies rather than mere automakers to attract investment.
Musk has warned about Chinese automakers for years, stating in 2023 after BYD COMPANY's rise that Chinese automakers would "demolish" global competitors without trade barriers. Although the vast majority of Tesla's revenue comes from vehicle sales, leasing, and servicing, Musk has historically positioned Tesla as "a tech company that also sells cars." In Tesla's latest quarterly earnings call, he took a significant step further by announcing the end of Model S and Model X production to convert the Fremont, California factory for Optimus robot production.
Following the original Roadster, the Model S and Model X were Tesla's earliest models, with the Model S sedan launching in 2012 and the Model X SUV three years later. In 2025, these two models accounted for only about 3% of Tesla's total sales. Tesla continues to sell the Model Y, Model 3, and Cybertruck. In recent years, Tesla has repeatedly cut prices on these models amid intensifying global EV competition.
Musk believes China will remain Tesla's primary competitor in the new field of humanoid robotics. On Tesla's Q4 earnings call, Musk stated, "There's no question that China will be our toughest competitor. There's no doubt about it. I've always felt that people outside of China underestimate the intensity of the competition there. It's extreme, and they are very good."
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