Global carmakers struggle to maintain competitiveness against China's technological offensive

Major US, European, and Japanese automakers are undergoing a process of strategic repositioning in the face of the accelerated rise of Chinese manufacturers, which have consolidated their leadership in electric vehicles, batteries, industrial design, and software development, according to an investigation published this week by the BBC on the occasion of Auto China 2026, the world's largest motor show. The transformation is reflected in the public acknowledgment from executives themselves: the president of Honda, Toshihiro Mibe, said after visiting a highly automated plant in Shanghai that his company has “no chance against this,” while Ford CEO Jim Farley warned that Western carmakers are “in a fight for our lives.”

Foreign brands' market share in China fell from 64% in 2020 to 32% this year, according to data from the consultancy Automobility. The International Energy Agency estimates that producing a small electric SUV in China is at least 30% cheaper than in advanced economies, thanks to lower battery costs and a dense supply chain. The Chinese company BYD has developed ultra-fast charging systems capable of adding 400 kilometres of range in five minutes. At the Xiaomi factory on the outskirts of Beijing, a vehicle rolls off the production line every 76 seconds. The Huawei Maextro S800 luxury sedan has outsold the Porsche Panamera and BMW 7 Series combined in China's segment for vehicles above USD 100,000.

The Chinese consolidation has altered the nature of traditional alliances. Stellantis, owner of the Peugeot and Jeep brands, recently signed an agreement worth one billion euros with the Chinese state-owned Dongfeng to produce vehicles intended for both the domestic market and export, and plans to introduce the Chinese electric brand Voyah into Europe. Volkswagen, in turn, paid USD 700 million to access the software architecture and autonomous driving systems of the Chinese firm XPeng, a technology the German group acknowledged it could not develop internally within the required timeframes. Toyota, Hyundai, Ford, and Nissan are also expanding their research operations in China or evaluating the production of models designed in that country at foreign plants.

China currently exports around seven million vehicles a year, close to half of them electric. Its expansion into Europe faces tariffs of up to 45%, and it is practically excluded from the US market by levies above 100%. Brands such as BYD, Chery, and SAIC are nonetheless deepening their penetration into Europe and emerging markets. The Chery Jaecoo 7 became one of the best-selling models in the United Kingdom just fourteen months after its launch. The firm XPeng has announced that it is prioritizing the development of humanoid robots and flying cars alongside electric vehicles.