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

Western automakers, from the Big Three to pure electric carmakers, have issued the same stark warning: Chinese automakers will pose a threat to their survival if domestic production is not protected.

In December, ahead of a House hearing on Chinese cars, the Alliance for Automotive Innovation (AAI), which represents the Big Three and other automakers, wrote: “China poses a clear and present threat to the U.S. auto industry.”

AAI said Congress needs to maintain the Commerce Department’s Biden-era ban on the import of certain technology and software from China, which effectively bans vehicle imports from Chinese manufacturers.

In recent comments, business executives have reiterated a version of this message

Electric car maker Rivian (RIVN) is kicking off a big year with the launch of the entry-level R2. While short-term issues such as cost control and demand for electric vehicles are of greater concern to the company, the threat from China is not far away.

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

“There’s nothing magical happening with China’s cost structure. It’s really two things that you can track very clearly,” Scarlinger 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. This is a highly subsidized industry, with factories and manufacturing contracts being paid for by the local equivalent of the federal government.”

The second factor is labor, which costs Chinese automakers only one-quarter to one-fifth of what U.S. companies do.

For now, Scarinch says the current tariffs “balance” the cost of these vehicles and protect U.S. manufacturing. But only for now.

Despite the tariff buffer, Ford CEO Jim Farley believes China’s rising dominance remains a threat.

“We’ve been a year behind our Chinese competitors. They’re more prominent globally now. In the U.S., it’s not that much, but you go to Europe, you go anywhere else, China is a big deal,” Farley told Yahoo Finance in January.

Chinese automakers accounted for about 6.1% of the European auto market last year, a 99% increase from 2024. Although the tariff for Chinese electric vehicles entering the EU is as high as 35.3%; however, plug-in hybrids and full hybrids are excluded.

Farley has in the past called Chinese-made vehicles an “existential threat” to the U.S. auto market not only because of the country’s technological advances but also because of its labor infrastructure that supports cheap manufacturing.

“They pose a big threat to the local workforce, they receive huge subsidies from the government and they export,” Farley said. “As a country, we need to decide what is a level playing field.”

Read more: Learn how to lower your car insurance costs in 2026

Farley is hedging his bets, however, with reports that Ford has been in talks with China’s Xiaomi for an electric vehicle partnership that could open the door to the U.S. market, although both Ford and Xiaomi have disputed the report. The Wall Street Journal reports that Ford and BYD are also discussing a battery deal.

General Motors (GM) CEO Mary Barra is working on the Canadian government’s trade deal with China, which would allow 49,000 Chinese-made electric vehicles to enter the country each 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 operations, including joint ventures with Chinese automakers such as SAIC Motor, has first-hand knowledge of China’s fiercely competitive domestic market and has reason to worry about what opening Canada’s doors to Chinese electric vehicles could mean for the auto industry.

In addition to the United States, China is also preparing to continue to develop and increase its control over global markets.

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

Stellantis (STLA), the most Eurocentric of the Big Three, sounded the alarm about what was happening in the EU when Chinese imports arrived.

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.

Read more: How to find the best luxury car insurance

Filosa and Porsche (P911.DE) Chief Executive Officer Oliver Blume said in an op-ed earlier this month that the EU should use CO2 bonuses or green incentives for European-made vehicles as a way to meet climate goals and protect jobs.

“Europe is witnessing the emergence of new geopolitical competitions,” Filosa and Bloom write. “Trade, technology and industrial capabilities are more mobilized than ever to serve national interests. The EU must quickly choose its own path.”

Pras Subramanian is Yahoo Finance’s chief automotive reporter. You can follow him X etc. Instagram.

Click here for the latest stock market news and in-depth analysis, including events moving stocks

Read the latest financial and business news from Yahoo Finance