If investors come back to mid-2024, it comes with a very stark warning from Bank of America analyst John Murphy, who urged General engines(NYSE:GM) And Ford automobile company(NYSE:F) consider leaving China. The reason was a growing list of subsidized Chinese automakers that were advancing rapidly and undercutting prices globally while being at the forefront of technology to electric vehicles (EV).
Today, that warning seems true, as China’s auto market is currently embroiled in a brutal price war and foreign automakers are struggling. Worse still, some recent data from China suggests competition is closing in on the highly valuable U.S. market.
Image source: Tesla.
As Chinese brands face increasing competition and a seemingly endless price war, the race to expand beyond their borders is also heating up. China’s exports of fully electric vehicles jumped 67% to a new high of 1.65 million vehicles in 2025. These were simply fully electric vehicles; Overseas shipments of plug-in hybrids and range-extended electric vehicles more than tripled to 969,000, according to the China Association of Automobile Manufacturers.
Another sign that a changing of the guard is happening in the global auto industry is that Tesla(NASDAQ:TSLA) ultimately lost its claim as the world’s leading seller of electric vehicles. Tesla faces a number of speed bumps, including the end of the $7,500 federal electric vehicle tax credit in the United States, an aging product line and some consumer backlash following CEO Elon Musk’s brief stint in politics, among others.
Tesla’s sales slide intensified at the end of 2025, with sales down 16% in the fourth quarter and full-year sales down 9%. Simultaneously, BYDthe Chinese electric vehicle maker giant, announced that it has sold 2.26 million electric vehicles worldwide, a gain of 28% compared to 2024. And as data has previously indicated, a growing proportion of these sales have taken place outside of China.
Chinese vehicles will eventually arrive in the United States. High tariffs can only protect Detroit automakers and others for a limited time. Automakers are aware of this and are preparing in several ways, including Tesla offering a lightweight version of its Model 3 sedan for around $37,000. Tesla is also looking to diversify outside of the auto 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 expanding its Universal Production System for electric vehicles to help reduce costs and improve production efficiency. Ford’s new assembly shaft will use three parallel lines, allowing the front, rear and battery to be built simultaneously before assembly, resulting in a drastic reduction in 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 launch the Universal Electric Vehicle Production System with a new mid-size electric truck that has a target price of around $30,000, about the same price as the Model T when adjusted for inflation.
These small examples only scratch the surface of the battle that lies ahead for automakers. The response from Detroit automakers will have to be multifaceted for long-term investors. The response so far has started with a strategic shift to reduce electric vehicle production until the market is ready and focus on more cost-effective hybrids, as well as extended-range and gasoline-powered vehicles, to help fund the accelerated development of electric vehicles.
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 the technology. Automakers will also need to push forward and down; this means advancing software and technology to develop software-defined vehicles and platforms and lowering prices to be more competitive with Chinese offerings.
For long-term auto investors, the warning was sounded years ago – and now is the time to start including these developments in your investment thesis.
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Daniel Miller holds positions at Ford Motor Company and General Motors. The Motley Fool Ranks and Recommends Tesla. The Motley Fool recommends BYD Company and General Motors. The Mad Motley has a disclosure policy.
