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Introduction

The question has shifted from "if" to "how".

In recent years, China's automotive industry has witnessed remarkable growth, not only fostering intense competition in the domestic market but also extending its reach globally. With the rapid expansion of production capacity and a surge in domestic sales, venturing into overseas markets has become an inevitable strategic move for many Chinese automakers.

Although Chinese automakers have made inroads into global markets across low, medium, and high segments, including Asia, Africa, Latin America, the Middle East, and Europe, their presence in the US—the world's second-largest automotive market—has remained tentative. Even occasional attempts have ultimately faced obstacles.

Previously, entering the US market was seen as a litmus test for the capabilities of Chinese cars. However, for today's Chinese automakers, facing evaluations from consumers worldwide, they no longer seek validation from the US market. Instead, entering the US is now merely a part of their broader commercial expansion.

In other words, for US consumers, particularly ordinary households grappling with high inflation and escalating new car prices year after year, the potential entry of Chinese cars offers another possibility—a more cost-effective choice, bringing long-awaited, affordable, high-quality products to US consumers.

This isn't merely about having an additional brand option; it could potentially disrupt the entire market structure and pricing system, compelling traditional manufacturers to accelerate innovation and enhance services. Therefore, the question of whether Chinese cars can enter the US market has divided the US market into two major camps. However, both the capital market faction and numerous observers tend to welcome this prospect.

01 Market Advocates Suggest Sharing Dividends

In the eyes of supporters, Chinese cars entering the US market are not a threat but an inevitable outcome of market evolution and mutual benefit. Recently, the US National Automobile Dealers Association (NADA) convention was held. Steve Greenfield, a partner at a venture capital firm, boldly predicted at the convention that US consumers would hear news of Chinese automakers selling cars locally by 2025.

He believes the most likely approach is not to go it alone but to follow the model used by international brands entering the Chinese market decades ago—forming joint ventures with existing US automakers.

This cooperation is far from a one-way technology transfer. Greenfield particularly emphasizes the core value of "shared intellectual property." He points out that the fundamental reason Chinese automakers can expand rapidly globally is that they have broken free from the traditional automotive manufacturing mindset. With a "blank slate" approach, they have integrated global experience to develop the ability to research, develop, and manufacture cars faster and more cost-effectively.

From more vertically integrated supply chains to optimized wiring harness layouts to reduce costs and weight, these strategies, which Greenfield refers to as "secrets," are precisely what US traditional automakers, mired in transformation costs and efficiency dilemmas, desperately need. "We need to figure out how they're doing it," Greenfield admits. "If we can ensure this intellectual property flows back to our traditional manufacturers, they'll become healthier as a result."

Price, as everyone knows, is the sharpest weapon in Chinese automakers' arsenal. Greenfield judges that China's unique advantage lies in its ability to introduce "high-quality cars priced below $20,000" to the US. Even accounting for higher labor costs in local US production, Chinese automakers can still offer highly competitive prices through their overall cost-control capabilities.

This directly addresses the current pain point in the US market—the growing affordability crisis in automotive pricing. For middle- and low-income families priced out of both high-priced electric vehicles and rising fuel-powered cars, a reliable, stylish, and inexpensive Chinese car undoubtedly holds strong appeal.

In fact, looking back at history, Chinese automakers' fascination with the US market did not start today. More than a decade ago, BYD had high-profilely announced plans to sell electric vehicles in the US and conducted small-scale trials, such as supplying electric buses to some California institutions. Geely also indirectly explored the US market through its acquired Volvo brand.

However, these early attempts failed to scale up, either because products did not fully adapt to US regulations and consumer habits or due to low brand recognition and lack of sales networks. Nevertheless, some automakers have continued their efforts in recent years. For example, NIO began exploring the possibility of entering the US market in 2022, and BYD showcased the Tang EV at the Pebble Beach Concours d'Elegance in the US in 2019.

In reality, the vision depicted by Greenfield, representing the capital and market factions, is pragmatic. Chinese automakers will arrive with mature dealership partners and local financial support. While establishing our own dedicated financial institutions may be difficult, numerous US financial institutions are eager to become our partners.

This ecosystem-driven approach can effectively dissolve two major market entry barriers: channels and finance. In his view, rather than treating Chinese automakers as enemies to be kept out, it is better to incorporate them into our system through cooperation, turning threats into assistance. Ultimately, this will allow US consumers to buy cheaper cars while enabling US automakers to obtain much-needed efficiency and cost-optimization solutions.

02 The Questions of When and How

Today, Chinese automakers have quietly laid the groundwork in the North American market. For example, they have continuously expanded their market share in Mexico and cautiously tested the waters in Canada, gradually laying the foundation for their eventual entry into the US market. Analysts generally believe that the core question is no longer whether Chinese automakers will enter the US market but when and how they will do so.

Analysts point out that the vast mass-market vehicle segment in the US represents the true core opportunity, but Chinese automakers still face tariff barriers that make it difficult to smoothly enter this market. However, as China actively expands its automotive export market and the US market demonstrates strong demand for more affordable cars, these tariff barriers are facing increasing pressure.

Shea Burns, a partner in the automotive practice at AlixPartners, believes that if Chinese automakers enter the US market, they will most likely use electric vehicles as a breakthrough, given China's significant cost and technological advantages in this field, which will become their core competitiveness.

Trump has also expressed a clear stance: he welcomes Chinese automakers to build factories in the US while criticizing Canada's decision to allow reduced tariffs on a small number of Chinese electric vehicles. "If they want to come here and build factories, employing you, your friends, and your neighbors, that's great—I love that," Trump said in a speech in Detroit on January 13. "Let China come."

Analysts believe that Trump's statement highlights that building factories locally in the US, rather than directly importing, is the most feasible and acceptable path for Chinese automotive brands to enter the US market.

Michael Dunne, CEO of Dunne Insights, predicts that within the next five years, a Chinese automaker will choose a location in North America to build a factory. "Chinese companies may also first establish assembly bases in Mexico and Canada to open up more channels for future supply to the US market, but the most likely scenario remains production in the southern US states," Dunne said.

At the same time, Dunne also pointed out that Chinese automakers' entry into the US market will likely face resistance from traditional automakers and unions. Among them, Detroit's local automakers will suffer the greatest losses, while Japanese, South Korean, and German automakers, unwilling to see Chinese competitors enter the US market and take away market share, will also be significant sources of resistance.

Notably, compared to the period when previous attempts by Chinese automakers to enter the US market failed, the most core change today lies in the products themselves.

Some media outlets have expressed astonishment each time they visit Chinese auto shows. New Chinese models not only feature numerous screens and rich software functions, shedding their past image of being low-end and crude, but more importantly, they are no longer limited to the positioning of small urban vehicles. "Today, Chinese consumers' demands are fully converging with those of US consumers—they both prefer large vehicles."

Compared to the US attitude, Canada is adopting a more cautious market opening strategy. Currently, Canada's overall tariffs on Chinese electric vehicles remain above 100%, but under a quota plan framework, 49,000 Chinese electric vehicles can enjoy low-tariff treatment, with tariffs reduced to just 6.1%.

Canada's policy announcement in mid-January sparked widespread speculation in the industry. People believe that Chinese automakers may follow the successful path of Japanese and South Korean automakers, using the Canadian market as a starting point to accumulate market experience and build product reputation before advancing in line with the trend into the larger US market.

"Traditionally, such automakers often need to test market reactions before entering large markets, so they choose medium-sized markets like Canada to cut in, observing the gaps between their products and competitors and understanding market demand characteristics," explained Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions.

He believes this development path is equally applicable to Chinese automakers, especially in the low-end segment of the US market, where other foreign brands have previously succeeded and where significant market gaps still exist today.

Fiorani further illustrated with examples: In the 1950s, it was Volkswagen; in the 1960s, Toyota; and in the 1980s, Hyundai. These brands all started in the low-end segment of the US market, gradually gaining a foothold and expanding their market share. "As traditional automakers shift toward the high-end market, they have left obvious market gaps in the low-end segment, which is precisely one of the core areas where Chinese automakers can precisely cut in and fill the void."

Editor: Li Sijia Editor: He Zengrong

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