American Defense Against the Chinese Electric Vehicle Expansion 3. How to Shelter from the Dragon

America has long come to terms with the fact that it is no longer the global trendsetter in automobile manufacturing. Years of globalization have brought foreign automakers to nearly half of all vehicle production within the United States. In fact, foreign manufacturers—primarily from Europe, South Korea, and Japan—account for about 45% of car production in the U.S. The largest company is Toyota, with around 15% of production, followed by Hyundai and Honda, with 11% and 8.5%, respectively. Yet, having once allowed waves of European and Japanese-Korean “colonization” of its car industry, Americans are now strongly opposed to giving space to the countless “little dragons” of Chinese automakers, fully understanding that given China’s vast industrial scale, doing so would mean saying goodbye to the remaining vestiges of their own automotive industry.

Moreover, Americans believe that Chinese companies are not entering the U.S. market simply to compete in finished vehicle production, as Europeans and “non-Chinese Asians” do, but to carry out a real (no longer figurative) colonization of the industry’s entire technological chain and secure dominance, as they have already done in other sectors—for example, in solar panel production.

Chinese electric vehicle manufacturers do not yet dominate in the U.S., but the threat is no longer theoretical. With the right mix of favorable consumer conditions, policy adjustments, and supply chain dynamics, they could trigger a major upheaval in the industry.

By 2025, several Chinese automakers—foremost among them BYD—had indeed become formidable competitors on the global market. Originally a battery manufacturer, BYD has become the world’s leading electric vehicle producer. The 2023 BYD Seal, an elegant sedan, not only surpasses Western rivals in build quality but is also 25% cheaper to produce.

BYD’s growing portfolio includes budget models such as the Seagull (up to USD 12,000) and Dolphin, as well as larger electric SUVs such as the Song and Tang. These models offer a compelling mix of price, design, and performance—qualities that resonate far beyond China’s borders.

To support its global ambitions, BYD is actively localizing its supply chains, production, and workforce. At the company’s four existing overseas plants, the localization rate exceeds 40%. New factories in India, Turkey, and Mexico are expected to surpass that figure.

China has already achieved immense success in the European automotive market, particularly in the EV segment, thanks to Europe’s “open door” policy toward Chinese FDI. Registrations of Chinese cars in Europe rose by 91% in just the first seven months of 2025. Seventy-five Chinese automakers now control roughly the same share of the European auto market as Mercedes-Benz. In 2023, 40% of China’s EV exports went to Europe, and between 2021 and 2023, Chinese EV shipments to the EU increased by 361%. European Commission President Ursula von der Leyen lamented that Chinese EVs are “flooding the European market” due to “market distortions in China.”

Analysts predict that by 2027, BYD will produce more than 700,000 electric vehicles annually in Europe—about 500,000 at its Hungarian plant and 220,000 at its Turkish one. In fact, by 2028, BYD plans to manufacture in Europe all the vehicles it sells there, allowing the company to completely bypass EU tariffs on its EVs and accelerate its penetration of the European vehicle market.

Since Europe is already feeling the damaging effects of BYD’s FDI, America certainly does not want to find itself in a similar position.

Since August 2025, the U.S. has imposed 50% tariffs on the import of Chinese cars and auto parts but has so far kept its doors open for Chinese investment in the U.S. Auto industry lobbyists fear that allowing BYD or other Chinese EV producers to manufacture in the U.S. would create a precedent and a roadmap for other Chinese companies to circumvent America’s tariffs.

Attention! A crucial point! It might seem that we’re talking about foreign direct investment (FDI) into the U.S. economy! In neoliberal economic mythology, FDI has always been regarded as the most efficient form of investment—bringing advanced technologies, organizational expertise, and new jobs, the ultimate dream of any recipient nation. Such direct investors are to be cherished, courted, and enticed by all possible means. Especially since the Chinese intend to invest in greenfields, not brownfields, as in Russia, where FDI inflows often closed existing enterprises instead of creating new ones. However, American analysts, unburdened by neoliberal blinders, assess Chinese FDI comprehensively and strategically—and thus voice a set of well-founded concerns.

The first concern relates to the zero effect on jobs. Even if BYD or another Chinese automaker opens a new factory in America, it will not create new production jobs. On the contrary, if a Chinese-owned plant produces vehicles that displace those made by American workers at another factory, it simply transfers U.S. workers into the hands of a China-based automaker. Moreover, since such a plant would be a greenfield investment, it would likely be located in a “right-to-work” state, further accelerating the relocation of jobs away from the industrial Midwest.

The second concern involves worsening America’s already dire trade balance with China. Because Chinese EV manufacturers primarily use parts and components sourced from suppliers within their existing, China-focused supply networks, this will only exacerbate the U.S. trade deficit with China, as these parts would need to be imported. Moreover, the share of American-made components in Chinese vehicles produced on U.S. soil would likely be far smaller than in vehicles made in China itself.

The third concern is even more far-reaching, as it involves securing cybersecurity for vehicles running on Chinese software. On March 17, 2025, new U.S. regulations introduced sweeping restrictions on the import and sale of vehicles and related components. The Bureau of Industry and Security’s Connected Vehicles Rule (“CV Rule”) prohibits the import or sale of CVs, connected vehicle systems, and automated driving systems that have direct, significant, or associated links to China. Although this is a somewhat separate issue (not all Chinese EVs are connected vehicles, though most ultimately will be), it is yet another reason why U.S. authorities should not allow vehicles to be manufactured domestically by companies headquartered in China.

Thus, in an effort to preserve their own auto industry, American business circles have arrived at a notion that until recently would have seemed almost heretical: the need to ban FDI from a country that is a strategic competitor to the United States. Ultimately, strategic motives tied to maintaining the industrial base have become key factors today. Yet, rejecting FDI—even though President Trump continues to publicly welcome it after declaring a global tariff war—marks a new and telling step in the rise of strategic protectionism.