China Is Overtaking America. In an Electric Car.Ethan Dodd
Chinese electric vehicles don’t just pose a market threat to Tesla. They could also be a weapon of war.
When the history of the early 21st century is written, it will surely focus on the war for global supremacy between two great nations: China and the United States.
It’s a war playing out in countless arenas, and all the signs point to America falling behind. China is hoarding rare earth minerals, building batteries, dominating drones (the ones deciding the fate of Ukraine), controlling critical supply chains, and stealing intellectual property. Oh, and it’s also coming for America’s electric cars.
Tesla, Elon Musk’s electric vehicle company, was once a potent symbol of America’s technological supremacy: a reminder that this country has the best ideas—and the will to make them happen. But, in a sign of the times, America’s EV pioneer now faces a growing threat from Chinese companies that have studied American inventions, replicated them, and arguably surpassed them, selling them—at scarily cheap prices—around the world.
Last year, China’s leading EV company, BYD—it claims the initials stand for Build Your Dreams—sold 4.3 million vehicles, overtaking reigning EV champion Tesla as the world’s largest EV maker. In Germany, China has over 40 percent of the EV market. In Mexico, it’s 70 percent. In Brazil, it’s an astonishing 89 percent, the vast majority of which are BYD autos.
“It’s the most humbling thing I’ve ever seen,” Jim Farley, the CEO of Ford, told Musk’s biographer Walter Isaacson. “We are in a global competition with China,” he went on. “And if we lose this we do not have a future at Ford.”
Why? Because, as the world shifts from fossil fuels toward the cheaper electricity-powered technologies, every car company will need to sell electric vehicles. Those that don’t will fail. Indeed, just this past Monday, Ford announced a $2 billion retooling of a 70-year-old manufacturing facility in Louisville, Kentucky—to produce EVs, which the company says will be affordable and profitable. Just like BYD’s autos.
Farley has been outspoken about his fears about China’s EV industry.
“We saw this coming for years,” he said, when he made the announcement. “We knew that the Chinese would be the major player for us globally.”
“Big Tech has their ambition in the auto space,” he added. “They’re all coming for us.”
China now has around 130 EV companies, with names like Xiami, NIO, and Li Auto, as well as BYD; if you’ve never heard of them, don’t feel too bad. You’ve never seen one on an American road. Chinese EVs are effectively banned from the U.S.
This gets to the second threat these cars constitute, which goes beyond the economic: Many U.S. officials believe that China’s EVs are a risk to our national security. Like the social media company TikTok and the telecom infrastructure company Huawei, China’s EVs have the means to spy on the West.
It seems the West is catching on to the possibility that EVs are a potential weapon.
Specifically: Their built-in surveillance systems—loaded with cameras and sensors—could allow the cars to capture data that could then be passed on to the Chinese military. (The Free Press wrote about how this technology, called LIDAR, could compromise confidential data in September 2023.)
That’s why, last September, a few months before leaving office, President Joe Biden banned the import of any Chinese car that can be classified as a “connected vehicle”—that is, a car with the hardware to connect to the internet, allowing sharing of data with devices outside the vehicle, and whose software can be updated automatically from afar, like an iPhone.
In a statement, Biden’s then–commerce secretary Gina Raimondo said: “When foreign adversaries build software to make a vehicle, that means it can be used for surveillance, can be remotely controlled, which threatens the privacy and safety of Americans on the road.”
She continued: “In an extreme situation, a foreign adversary could shut down or take control of all their vehicles operating in the United States all at the same time, causing crashes, blocking roads.”
It’s not just U.S. officials who are worried. The Israeli military has said that Chinese electric vehicles—which dominate the Israeli market—would no longer be allowed onto military bases. The UK took similar measures earlier this year.
It seems the West is catching on to the possibility that EVs are a potential weapon.
“China presents the United States with a challenge unlike anything we’ve seen since World War II,” says Michael Dunne, an EV consultant and author of a forthcoming book on the U.S.-China race for EV dominance.
If China’s EVs were allowed in the U.S., he said, “It would be like the equivalent of 10 Japans coming at us in the 1980s.” That was the era when cheaper, higher-quality Japanese imports made huge inroads in the U.S. car markets, destroying Detroit’s long-held dominance.
A large part of the appeal of Chinese EVs is that they are inexpensive. BYD’s compact Seagull starts at less than $8,000 in China; without tariffs, it could sell for less than $20,000 in the U.S.—compared to the $35,000 price tag of Tesla’s least expensive car, the Model 3. Xiaomi, a Chinese cell phone company, released its first electric SUV, the YU7, earlier this summer to compete with Tesla’s Model Y. The YU7 lists for $35,000; the Model Y starts at $46,000 and, fully loaded, can get as high as $61,000. When it was launched in July, the YU7 sold more than 200,000 units in China within three minutes.
Yet again, China is undercutting a once-proud U.S. industry by offering the world the same thing, for a lot less.
But it’s not just about cost. Although the early Chinese EVs were shoddy, they have since improved to the point that the top companies like BYD offer build quality, technology, and a driving experience that increasingly rivals Tesla, which has not released a new model since the 2023 Cybertruck.
China’s big bet on EVs began with nationalist pride—and failure. Since the 1980s, China hoped that joint ventures with American, German, and Japanese carmakers would allow them gain the technological know-how to develop its own name-brand car companies.
But the Chinese car companies couldn’t master the intricacy of the internal combustion engine well enough to compete with Western automakers. So in 2007, the government appointed Wan Gang, a former Audi engineer from outside the Communist Party, to Minister of Science and Technology. Wan had made a prescient proposal in 2000 that China could rise to superpower status only by ridding its dependence on foreign oil and developing a new type of vehicle powered by clean fuel. Wan would help China leapfrog into the future. (Wan Gang stepped down in 2018.)
The state went all in, offering $230 billion in subsidies, and introducing regulations that made it easier for car buyers to get license plates for EVs than gas-powered autos. It was all part of the country’s 2015 “Made in China 2025” directive to become a tech-forward, energy-efficient manufacturing powerhouse.
That bet has paid off. And it starts with BYD. The same year Tesla was born, 2003, BYD’s founder, Wang Chuanfu, announced the cell phone battery manufacturer would become a car company and acquired a local carmaker to jump into the business. Riding Deng Xiaoping’s capitalist wave that opened China to the world, Wang rose from poverty to billionaire status. By 2008, Warren Buffett was impressed enough that he bought 10 percent of the company for $230 million. Wang is today worth $23.7 billion, according to Forbes.
Still, it was Tesla’s arrival in Shanghai in 2019 that gave the Chinese EV industry the push it needed. That January, the company broke ground on an enormous “gigafactory”—which remains Tesla’s largest factory outside of the U.S. By the end of the year, it was selling Model 3s. Chinese consumers loved them.
“It took a Western automaker to bring the sizzle,” said Tu Le, founder of the Detroit-based consultancy Sino Auto Insights. “Chinese people love entrepreneurs.”
In his recent book, Apple in China, Patrick McGee has written about how the decision to manufacture iPhones in China has transferred a dangerous amount of technical expertise to a country that is not an ally of the United States. Similarly, the quality of Chinese EVs rose in no small part because they borrowed heavily from what they saw Elon Musk’s company doing, everything from the design of the car to its manufacturing standards.
“I don’t think BYD happens without Tesla,” Le said. The year Tesla started making cars in China, BYD was selling less than 500,000 “New Energy Vehicles,” which include both battery-powered and plug-in hybrids. By 2024, BYD was selling 4.3 million autos. While Tesla was once the market leader in China, today BYD boasts 34 percent market share—compared to six percent for its American rival.
China’s rapid rise hit Western automakers as a shock. The big revelation came at the 2023 Shanghai Auto Show. Visiting China for the first time since the pandemic, executives were stunned by all the flashy new China-made EVs.
“It was an ‘oh shit’ moment for them,” Le said.
Kevin Williams, the Detroit-based correspondent for InsideEVs, drove the Xiaomi YU7 around bendy roads in Beijing, to compare it to the Tesla Model Y. “The interior is nicer. It’s significantly quieter. . . . It has a lot of software integration and a lot of thoughtful features that Tesla just doesn’t have.” He concluded, “Tesla is cooked.”
In Donald Trump’s White House, electric vehicles are a fraught subject.
It’s an oversimplification to say, as Republican Senator Tom Cotton of Arkansas posted in April, that “China doesn’t innovate—it steals.” That may have once been the case, but it’s not anymore. China is streets ahead when it comes to, say, battery technology.
Tesla is now “trying to get into the game,” partnering with Chinese battery behemoths CATL and BYD, which is still a major force in battery technology, according to Kyle Chan, an EV researcher at Princeton. Ford is working with CATL to build up its manufacturing capacity for cheaper batteries in Michigan.
“They do things really well that we need to learn,” said Ford’s Farley. Or as Le told me, “The pupil is now the teacher.”
In Donald Trump’s White House, electric vehicles are a fraught subject. In the early months of Trump’s presidency, of course, he deputized the Tesla CEO to cut the government bureaucracy, and when Musk’s work drew strong opposition, Tesla sales fell. Protesters defaced some cars. And next thing we knew, the president had several Teslas brought onto the White House lawn, where he praised them, and said he was buying one himself.
But his “big, beautiful bill” also eliminated a $7,500 tax credit for EV purchases, and the administration has never shown the slightest sign that it agrees with Farley on the urgency of producing affordable EVs. On the contrary, it has taken steps aimed at helping gasoline-fueled autos. And of course, Trump and Musk had their famous falling out. Tesla is unlikely to get any favors from this administration any time soon.
But what of those national security concerns? In May, the House Committee on Homeland Security announced that it would investigate BYD, requesting documents related to its “data security practices” and “operational footprint.”
But of course the big question mark is the president himself. Just this week, he backed away from the massive tariffs that he had threatened to impose on China, giving the two countries another 90 days to come to a trade deal. “The relationship is very good with President Xi and myself,” he said.
And Trump continues to ignore a law passed by Congress—which the president himself signed—banning TikTok unless it is sold to an American company. (The law was passed because of concerns that TikTok, which is owned by a Chinese company, could be scooping up data on American citizens and sending it to China.)
Also: The Biden administration banned the American tech company Nvidia from exporting certain high-end chips to China. Again, national security was considered to be at stake: If China had access to the chips, it could beat the U.S. in the all-important race for AI dominance. But again, Trump ignored those concerns and cut a deal that allowed Nvidia to sell to China so long as the U.S. government got a 15 percent cut of the revenue.
And so, it would be perfectly within character for Trump to decide that the threat of Chinese EVs is overblown. What if, as part of the trade deal that administration officials are currently negotiating with their Chinese counterparts, he allowed them to be sold on American shores? What if he ignored the same national security fears that have caused allies to ban them?
The irony is that electric vehicles are indispensable to the industries America most needs if it is to revive manufacturing the way Trumps wants. “Batteries, rare earth magnets, AI-driven autonomy, and software-defined mobility—these are the engines of future economic and geopolitical power,” said Bill Russo, CEO of Automobility, a Shanghai-based strategy firm. “Without a thriving EV industry at home, America risks forfeiting its leadership in the foundational technologies of the next industrial age”—and effectively surrendering America’s status as world superpower to China.
According to Andrew Polk, who consults for some of the world’s largest companies and investors: “If we forced China to build its cars here as we did to Japan in the 1980s, within 10 years Americans would stop chanting ‘Buy American’ and realize ‘these cars are cheaper, they’re better, and you have to get one.’ ”
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