The battle for the electric vehicle (EV) market is becoming fiercely one-sided, and it isn’t going in favor of U.S. or European carmakers.
A recent development exemplifies this trend: Ford CEO Jim Farley, the face of one of America’s most iconic automotive brands, now drives a Chinese-made Xiaomi SU7 EV. Farley claims that he was so impressed that he “doesn’t want to give it up,” remarking on Xiaomi’s position as an “industry juggernaut.”
The irony of the story is hard to miss.
But it also highlights a more profound challenge facing Western automakers, as they contend with China’s growing dominance in the EV industry.
Sales numbers from 2023 underline how seriously Western automakers are struggling in the Chinese market. Ford and General Motors reported continued declines in Chinese sales, while European brands like Volkswagen saw a 6 percent drop in their market share.
Meanwhile, Chinese manufacturers are securing an unshakable foothold. Companies like BYD, Nio, and XPeng have set ambitious sales goals and are on track to meet them domestically and globally, thanks to Beijing’s support, aggressive innovation, and an intense focus on local consumer preferences.
In contrast, Ford and General Motors have been scaling back in China. Ford, which has recently announced a shift towards hybrid models, has lost nearly 9 percent in stock value this year. Volkswagen, once a giant in the Chinese market, reported that it was losing market share to domestic companies with lower production costs and rapidly improving technology.
Chinese automakers have surged ahead with groundbreaking technology, from battery innovations to autonomous driving capabilities. The “China EV 100” policy has given domestic manufacturers both the financial backing and incentive to make waves in the market. Xiaomi’s SU7 is only the tip of the iceberg, offering a glimpse into the creative powerhouse that has allowed the company to sell out units six months in advance.
Xiaomi’s venture into electric vehicles may seem surprising, given its origin as a smartphone manufacturer, but this move exemplifies China’s broad, tech-driven approach to the automotive market. Xiaomi’s entry aligns with a broader trend of tech companies — including Huawei and Baidu — pushing into the EV market, often bringing fresh concepts that resonate well with China’s younger, tech-savvy population.
In terms of patents and innovations, China has made significant strides. The nation has been credited with over 70 percent of all new EV-related patents worldwide in the past five years. From solid-state battery advancements to electric motor efficiency improvements, Chinese firms are setting the pace for the future of automotive technology.
China’s dominance in the EV industry extends beyond its borders.
In regions like Southeast Asia and South America, Chinese EVs account for over 70 percent of market share in some cases, while Western brands are rapidly losing ground.
Europe and the U.S. are not just losing market share but also the technological edge. The production costs are lower in China, and local brands are capitalizing on the ability to innovate quickly without the legacy constraints that hinder traditional automakers. In contrast, legacy carmakers are grappling with outdated supply chains, slower research cycles, and, in some cases, reliance on outdated combustion engine technology.
Western brands are feeling the squeeze and have been attempting to recalibrate, but these adaptations may be too little, too late. Farley’s comment that “these guys are ahead of us” echoes the sentiment of industry analysts who have watched as Western automakers struggle to keep up with Chinese advancements. Despite pouring billions into EV development, companies like Ford and GM are saddled with high production costs and lower margins on electric vehicles. Ford, for example, saw a $1.14 billion loss in its EV division this year.
European brands are not faring much better. Volkswagen has redirected its resources to prioritize EV production in China, forming partnerships with local firms like Xpeng. However, the sheer momentum of domestic Chinese companies is hard to match, and VW’s sales figures remain underwhelming despite these efforts.
There is a glimmer of hope, though. As China aims to sidestep looming European tariffs by building EV factories directly on European soil, there may be a “golden opportunity” here for European automakers to learn from – or perhaps borrow – the technologies that have helped Chinese brands outpace them. That is, if the trade war with China doesn’t kill those initiatives.
As Farley’s switch to a Xiaomi EV illustrates, there’s a growing recognition among Western carmakers that China’s innovation cycle is not just a local phenomenon but a global industry threat. No wonder European leaders are increasingly vocal about “curing” this economic imbalance, with potential pathways suggested by recent reports like those from Mario Draghi, which emphasize deeper cooperation and investment within the EU.
So far, Europe has decided to take the road of extra taxation. Predictably, one of China’s answers will be increased production in Europe, to avoid such taxes. It would add an extra layer of irony to the story if European carmakers would need to resort to “technology transfer” (understand: industrial theft) from such future factories – a dramatic reversal of roles from just a decade before.
The question remains: can legacy brands catch up, or will they continue to rely on hybrid or partial electric strategies while China speeds toward full electrification? As Ford, GM, and VW brace for what’s likely to be a drawn-out battle, it’s clear that the road ahead is going to be anything but smooth for Western automotive icons.
