If investors rewind to the middle of 2024, it came with a very stern warning from Bank of America analyst John Murphy, who urged General Motors (GM 1.80%) and Ford Motor Company (F 1.09%) to consider leaving China. The reason was a blossoming list of subsidized Chinese automakers that were advancing quickly and undercutting the globe on price while leading in technology for electric vehicles (EVs).
Today, that warning seems accurate, as China's automotive market is currently enveloped in a brutal price war, and foreign automakers are struggling. Worse news yet is that some recent data out of China suggests the competition is moving closer to the highly valuable U.S. market.
Image source: Tesla.
What's going on?
As domestic Chinese brands face increasing competition and a seemingly never-ending price war, the race to expand beyond their borders is also intensifying. China's exports of full-electric vehicles jumped a staggering 67% to a new high of 1.65 million vehicles in 2025. That was merely full-electric vehicles; overseas shipments of plug-in hybrids and extended-range EVs more than tripled to 969,000, according to the China Association of Automobile Manufacturers.
Another signal that a changing of the guard is taking place in the global automotive industry is that Tesla (TSLA 0.04%) finally lost its claim as the world's largest seller of EVs. Tesla is facing a number of speed bumps, including the end of the $7,500 federal EV tax credit in the U.S., an aging lineup of products, and some consumer backlash from CEO Elon Musk's brief appointment in politics, among others.
Tesla's sales slump intensified at the back end of 2025, with fourth-quarter sales declining 16% and sales for the full year declining 9%. Simultaneously, BYD, China's juggernaut EV manufacturer, announced it sold 2.26 million EVs globally, a 28% gain over 2024. And as data previously indicated, a growing proportion of those sales happened outside of China.
Preparation is key
Chinese vehicles are coming to the U.S. eventually. Lofty tariffs can protect Detroit automakers and others only for so long. Automakers are aware of this and are preparing in a number of ways, including Tesla offering a stripped-down version of its Model 3 sedan for roughly $37,000. Tesla is also looking to diversify outside the automotive industry through battery storage, artificial intelligence (AI), robotics, and driverless vehicles.
Ford went back to the drawing board to try to recreate a Model T moment by restructuring its assembly line and developing its Universal EV Production System to aid in lowering costs and improving production efficiency. Ford's new assembly tree will use three parallel lines, allowing the front, rear, and battery to be built simultaneously before joining, which will result in a drastic cutting of parts, complexity, and production time.
Investors will have to wait for proof that this Model T moment can live up to the hype. But Ford plans to debut the Universal EV Production System with a new midsize electric truck that has a target price of roughly $30,000 -- about the same price as the Model T when adjusted for inflation.
NYSE: F
Key Data Points
Why this matters
Those small examples are barely scratching the surface of the battle that is coming straight for automakers. Detroit automakers' response will have to be multifaceted for long-term investors. So far, the response has begun with a strategic shift to scale back EV production until the market is ready and to focus on more profitable hybrids, as well as extended-range and gasoline-powered vehicles, to help fund accelerated EV development.
Detroit automakers are also exploring critical partnerships and collaborations, such as Ford's recent potential deal with China's BYD for hybrid batteries, which would reduce costs and provide access to technology. Automakers will also have to push forward and downward; that means pushing software and technology forward to develop software-defined vehicles and platforms and pushing prices down to be more competitive with Chinese offerings.
For long-term auto investors, the warning was sent years ago -- and now, it's time to start including these developments in your investment thesis.
