The Auto Industry's Case Against Chinese Vehicle Expansion

As concerns over vehicle affordability grow, a new debate is emerging around whether Chinese automakers should be allowed greater access to the U.S. market. In this episode, Mike Darrow, Chairman of the American International Automobile Dealers Association (AIADA) and President of the Russ Darrow Automotive Group, discusses why many dealers and automakers oppose the expansion of Chinese vehicle sales in the United States.

Darrow explores the industry's concerns surrounding national security, vehicle data collection, government-backed pricing strategies, and the long-term impact Chinese competition could have on the U.S. automotive market. He also addresses the affordability challenges facing consumers and explains why he believes the solution lies in pressuring existing manufacturers to build more affordable vehicles rather than opening the market to Chinese brands.

Key discussion points:

• Why U.S. dealers and automakers are concerned about Chinese vehicle imports
• National security questions surrounding connected vehicles and data collection
• The debate over state-backed pricing and market competition
• How automakers can address vehicle affordability without relying on Chinese imports
• Whether tariffs and industry guardrails are enough to mitigate potential risks
• AIADA's priorities on dealer advocacy, trade policy, and USMCA renewal

Darrow shares his perspective on one of the most consequential debates facing the automotive industry and what it could mean for dealers, manufacturers, and consumers in the years ahead.

Inside Automotive with Jim Fitzpatrick is powered by CBT News, your go-to source for the latest news, trends, and insights in retail automotive. Subscribe for more interviews with top industry leaders, dealership innovators, and experts shaping the future of automotive.

For more content, visit CBTNews.com and follow us on your favorite podcast platform.

Transcript

Welcome And The China Question

Jim Fitzpatrick 0:07

Welcome to Inside Automotive with Jim Fitzpatrick. Chinese automakers continue expanding around the globe, and the question whether they'll eventually gain meaningful access to the U.S. market is becoming one of the biggest debates in the automotive industry here in the States. Joining us now is Mike Darrow, chairman of the American International Automobile Dealers Association and president of the Russ Darrow Automotive Group, which is a fine organization. Mike, thank you so much for joining us on the show today.

Mike Darrow 0:35

Thank you for having me.

Jim Fitzpatrick 0:36

Sure. So uh this Chinese situation uh is is um is heating up, uh, as they say. I mean, uh around the world, as you know, they've taken market share in many, many countries, uh, and and it's a concern that many people have. Uh but on both sides of the aisle here, um the you know, we're we're we're now looking at uh U.S. senators and congressmen actually coming together on this, which is very unique to say, hey, we got to keep them out. Um however, this becomes, this comes at a time when affordability, you know, is at the forefront of every dealer's mind, OEM's mind, and certainly consumers. So when they hear, you know, and they read the articles about these incredible Chinese vehicles that they could buy for $30,000, $40,000, that have got great technology, beautiful styling, longer range, shorter time to charge, there's a lot of people out there going, well, maybe we need to take a second look at this Chinese uh band here. So um you've written an incredible article on here uh uh it at in the AIDA magazine and and website and such. Talk to us about this and and tell us where you stand and and why we should uh we should really hold off on allowing the Chinese vehicles to come in.

Mike Darrow 1:52

Well, affordability is an issue, but at what cost, right? So national security, uh we want to do what's in the best interest of our consumers, of Americans, and we're very concerned about that. You've got the rolling computers, right, uh that we all know it's been pretty well documented. So from a national uh security perspective, I think it's important to uh manage what happens next, right, with Chinese auto manufacturers or sales. And really it's it's kind of a predatory competition that we've seen out of the Chinese auto manufacturers, both in Europe and uh in Mexico, and and and to allow that into the US at the end of the day, it might look good initially for consumers or dealers, but down the road uh that could turn into you know a complete disaster. And so I think it's a concern. And I'm uh you you know, this issue uh the whole industry is pretty well aligned right now. You don't see this that often from manufacturers to dealers to suppliers to to the uh the lawmakers in Washington to the administration. It's we're pretty well aligned on this, and it's a bipartisan issue. And I think you you know, the whole TikTok issue and national security with China, how's that going to affect the auto industry? Uh and and watching it it's no surprise what what China's trying to accomplish. I I believe they want global domination uh in automotive market share, and if they can get a foothold into the United States, and they've already got a foothold in North America with with their recent rise in share in Mexico, and now they're foot in the door in Canada. So um it's really important that we talk about it, we we we we create some guardrails for sure, and trying to find what what it looks like, at least for today.

Guardrails Or A Hard No

Jim Fitzpatrick 3:33

Um speaking of guardrails, would would could you see a way forward for the Chinese vehicles to enter the U.S. market with strong guardrails in place, a couple of hundred thousand vehicles a year, maybe two or three hundred thousand vehicles. They've got to be sold through a franchise network, they've got to commit to a factory over the course of the next five years. Uh, they've got to also uh accept the fact that there would be tariffs put on these cars. Uh would those be suitable to you?

Mike Darrow 4:00

You know, I think never say never, right? And I think you can always look at anything. My initial reaction today would be no. I think we can continue to watch their behavior in other markets in Europe, in Mexico, see how they operate. You know, a lot of these manufacturers uh they're already competing with the Chinese auto manufacturers in these other markets. Toyota, for example, they can see what's happening in Mexico and they can see the vehicles in every segment are priced artificially low, the warranties are artificially long, um, you know, the incentives are artificially high, and they are buying market share. It's a predatory competition. So unless and until that could be fixed or or regulated in some fashion, and maybe it could be, it's gonna take some time. But you know, there's a bigger geopolitical issue here, right? Again, as it relates to national security and the stance of the administration with China on many other issues, this industry's uh too large to just open the door and let them flood in for sure. Uh so we've really got to proceed with caution. But um, I would say today no, to answer your question, down the road, we'll see. Time will tell.

Affordability Pressure Without China

Jim Fitzpatrick 5:12

What what do you say to the uh to the people out there that say if we are not allowing the Chinese to come in, even though they are subsidized by the Chinese government to build these incredible cars that we hear about, um the the fact that what what you're doing is you're playing into the hands of the manufacturers here in the U.S. that have got the new price of a car now over $50,000. Uh we know that that uh Jim Farley, who's president of Ford, you know, is now driving a Chinese vehicle to learn more about it and to kind of figure out, okay, how how are we gonna get this kind of technology built in our vehicles and have a shorter charge, have a longer uh charge when you're on the road, shorter to charge it up. I mean, they got a lot of positive things going on, but if I'm an automaker and I don't have to worry about the Chinese coming in, um, am I as that am I that concerned about affordability?

Mike Darrow 6:03

Well, we've got to keep the pressure on the manufacturers. We have to be better, right? Affordability is the issue. They have to make cars more affordable, whether we decontact them, decontent them, limit some of the regulatory uh issues around their auto manufacturing, and then you can talk about interest rates, insurance costs, and everything else that affect affordability, right? Yeah. So it's it's not just the domestic auto manufacturers, it's Toyota and Honda and Kia, and and and we we've seen right the manufacturers coming more into the U.S. And with with um they just need we need to make ours more affordable. So that's a collective effort. We have to keep the pressure on perhaps they can learn from the Chinese auto manufacturing, just like the Chinese learned from us so many years ago in so many different areas. You know, how how can we make a more efficient vehicle, a battery that charges faster? We still got to work on our infrastructure uh for for electric charging. Sure. Um so I think with with the manufacturers all working uh with that goal in mind, uh, you're right, affordability's uh it's still top of the mind for consumers.

Jim Fitzpatrick 7:10

Yeah, for sure. It seems as though the the auto industry and China, the domestic car makers here in the U.S. and China, it's been a very rich history with over 50 million General Motors vehicles that have been sold in China over the course of the last 20 years, another five and a half million from Ford. I mean, that the the vehicle market over there has been has been pretty much dominated by US made vehicles. And only in recent years have those numbers dropped substantially because of the fact that to your point, we showed him how to build a pretty good car, right?

Mike Darrow 7:46

You know, I think so. I mean it's really it's a trade policy issue, uh kind of. Um you know, and again, national security, trade policy, these are bigger geopolitical issues than just where where manufacturers can sell cars. Yeah. And so that's why it's it's uh it's a good feeling to know that this administration, uh some of these uh lawmakers, uh the Bernie Marinos of the world that see this and understand it and and can help uh manage the situation in a way that's favorable to the to us, to American consumers, sure, citizens, the manufacturers, dealers, suppliers, you know, all the employees that this industry impacts every single day, uh we just can't take the risk of blowing that all up. Uh again, many years down the road perhaps. But um, it's getting a lot of attention as it should.

Jim Fitzpatrick 8:38

Sure.

Would Dealers Take The Franchise

Jim Fitzpatrick 8:39

Um a number of dealers that I've spoken to um when I say, well, at the end of the day, if the if the Chinese were allowed to come in on a limited basis and sold through franchise dealer network, um would you be would you raise your hand to be a dealer uh a dealer? And uh a number of them have said, in fact, the majority have said, yes, I would. If that's the case and they're gonna allow them in, then yeah, I would want to be uh first on their list to be, you know, one of their dealers, or better yet, maybe even one of their distributors, if in the event that they decided to bring on distributorships, as we've seen with uh Subaru and Toyota here in the States. It's not many distributors left, but uh nevertheless they they they do do that. Um what is your feeling on that? What do you say to those dealers that say, you know, no, we don't we don't think they should be allowed in? However, if they are, I want to be a dealer.

Mike Darrow 9:26

I love the spirit of car dealers. We're all entrepreneurs, and that's why everybody's got their hand up saying, hey, yeah, I would take one. Right. But but the reality is it sounds glamorous, but but I mean I I couldn't say for sure now because we don't know what the guidelines or rules would be or if it's even a possibility in my market here in Wisconsin. I probably wouldn't be interested if I were to expand out into other markets, perhaps. But but as of today, the answer would be a hard pass for me. And um, you know, without without having all the devil's in the details, right? You'd have to know where where you know where where are the boundaries of of all of that. But um, I I just think it's pretty improbable that that's really gonna happen.

Jim Fitzpatrick 10:08

Yeah.

Mike Darrow 10:08

That's my opinion.

Tariffs Can’t Fix Data Risks

Jim Fitzpatrick 10:09

Yeah. Couldn't the pricing situation to level the playing field be um corrected with a tariff on the car? I mean, obviously, if the car is being built for $30,000, $40,000 instead of 60 or 70, couldn't that be corrected with a heavy tariff placed on the car?

Mike Darrow 10:25

I mean, it could create fair competition, certainly. But you still have the the the national security issue of all the data on board and the cameras and what is that being used for? And all of a sudden, if we wake up in 20, 30 years and China, the Chinese auto manufacturers uh with the Chinese government have 50, 60 percent market share in the US, that's a problem.

Jim Fitzpatrick 10:46

Yeah, right.

Mike Darrow 10:47

I mean, I think we could all agree on that. And and if and and we just can't let it get to that level. So um that that despite level playing field and pricing and everything else, um you you still got that national security issue hanging out there.

Jim Fitzpatrick 11:02

Yeah, yeah, for sure, for sure.

Lawmakers Align On Restrictions

Jim Fitzpatrick 11:04

Well, and it seems as though uh uh Senator Marino, uh, who is a car guy, we've interviewed him a number of times here. He's gonna be uh speaking at our conference in DC next week, which we're very uh pleased to have him there. Um he's obviously from a state where they're building, you know, there's manufacturing. Same with Senator Slotkin uh from Michigan. I mean, you know, those two senators are front and center on this because they're they're their constituents are are working in these factories and are employed by a number of auto manufacturers out there. Um is that the is it the same sentiment of other senators and congressmen that you know of from around the country that don't enjoy uh manufacturing plants in their states?

Mike Darrow 11:45

You know, I I I I think they take a the the ones I've spoken with understand the situation. And um I I think they look at it in a very uh conservative pro-American way. Yeah. And you know, like we talked about, it's an it's a nonpartisan issue, really. Both sides of the aisle see the the benefit of uh you know managing and controlling the situation in a regulatory way, yeah. Whether it's keeping keeping China out completely or or whether it's having some sort of really tight regulatory environment. But for today, I think I think this approach is appropriate for today.

Jim Fitzpatrick 12:22

Yeah, yeah. Just to kind of take one one step at a time here and see where this goes.

Mike Darrow 12:29

That's my opinion, yes, yeah. And and and you know, as far as AI ADA goes, I I think we support what these bills are. I think they're still being worked on a little bit. And uh we hope and believe we'll be able to support and endorse uh a final bill like this as well, you know, representing all the international nameplate dealers that we do. Um again, what's in the best interest of our consumers, yeah Americans, our manu, you know, all the all of our employees, right? Everybody. And and uh I think we're pretty much in agreement uh as a as a as an association that that's that's the right approach to take.

Factories And Jobs Versus Risk

Jim Fitzpatrick 13:09

Yeah, yeah. What do you what what is what did you think when the when the president, when President Trump said, hey, I'm kind of open to the idea. You know, if they come, they come. We get them to build a factory here. It means a lot of John paraphrasing, but it should it could mean a whole lot of great jobs here in the U.S. and and U.S. factory workers. What what was your take on that?

Mike Darrow 13:29

Yeah, I mean he he he's he's a smart guy, and that's it's a little bit scary. And uh, right, if if China said, hey, we're gonna we're gonna uh invest a trillion dollars in Chinese auto manufacturing in the U.S. and employ thousands of people. Yeah, it's very tempting, right? But again, he's got a lot of really good, smart people around him that understand the the economics of it. He also he understands it and gets it as well. But um I you know I'm glad he's here's the bottom line. I'm glad he's engaged in it anyway.

Jim Fitzpatrick 13:59

Yeah, right?

Mike Darrow 14:00

He's listening, he's engaged. They're always this administration's willing to work with our industry, which is which is terrific. Yeah, and so I know they're gonna listen. And you know, at the end of the day, I have faith and trust and confidence that that they'll make the right decision.

Jim Fitzpatrick 14:15

Sure, sure. Great.

FTC Letters And Price Transparency

Jim Fitzpatrick 14:17

Um, let me switch gears, if I may, with you for just a second. Uh get your take on uh the FTC, the 97 letters that were sent out to dealers across the country. Um, this is a really big deal, is it not? I mean, it this this can really change the way dealers do business. What what's what did you first think uh when you when you heard about the letters and what's your take on this this approach from the FTC?

Mike Darrow 14:40

So here in Wisconsin, we've always done business the uh our philosophy is you know you you do what's right, you you you know, full disclosure, transparency, and everything else. And I think 95% of the dealers across the country probably do it that way. So if it if it if it is better for consumers, which it is, and it helps the uh reputation of our industry, which it will, you know, then it to me it's good. It's a good thing, and it'll put everybody uh on not just an equal playing field, but but but consumers as well, and it'll weed out the bad actors, the few that are out there. And so it doesn't scare me at all or our our group here. We we have very uh strong consumer protection laws in Wisconsin, uh disclosures for consumers, and full transparency and tight advertising laws as well. So um it's not scary to me at all, but I think it's good for our industry.

Jim Fitzpatrick 15:36

Yeah, yeah, I do too. I do too. And I think that uh the dealers that I speak with about this, they say, hey, this might be the best thing that could have happened to our industry in the sense that speaking about a level playing field, that's kind of what this does, so that dealers can't, you know, play games with their advertised prices and sh, you know, surprise the customer. So, well, the doc feed wasn't included for $1,500 or whatever the dollar number is. So it it uh the number a number of dealers are looking at this as a good thing. However, they're also concerned that we all have got to play and read off the same sheet of music on this because of the fact that you may have some bad players out there, bad actors that continue to, you know, advertise cars um way below what they could be purchased for.

Mike Darrow 16:20

Yeah, well, anything good worth doing isn't always easy. But um, I think if collectively our industry works together, and you know, I don't know if self-policing is is really a thing or not, and I'm sure the regulatory agencies, the FTC, they don't want to be chasing down dealers either. But uh it's a good framework, and I think that uh you know most dealers are going to embrace it, and it'll be good for consumers and and like I said, good for our industry.

AIADA Priorities And Dealer Engagement

Jim Fitzpatrick 16:47

Sure, sure. Well, while I've got you here, you are the chairman of the American International Automobile Dealers Association, um, and you've got many, many of your viewers of your members that are our subscribers and viewers. Um, what are you working on uh for the second half of the year from the association?

Mike Darrow 17:03

The the goal is always dealer engagement. We we love capital visit dealership visits by by representatives. I've got one next week, Thursday, Congressman Brian Stiles coming to our Kia store in Waukeshaw, Wisconsin, and we're just finishing a two and a half million dollar renovation. We're investing in our dealership and our community and our employees in his district. And it's really important for the representatives to know what we do and how we support our communities. And then when we talk about issues like China and other things, you know, they they're they have an ear to the ground and you know kind of the impact we make from who we employ and manufacturing and uh international nameplate manufacturers in the United States. So dealer engagement is always the top priority. Um if there are opportunities to call your representative on a specific issue, or if we have an opportunity to have a fly-in in Washington, D.C., we love to have the dealers come in so their voices can be heard, have a seat at the table on these types of issues. It's really important. So it's always about dealer engagement and then doing whatever we can uh do to support them and their business. Obviously, affordability is a big issue. The one we didn't talk about that I thought was going to be my job this year had to do with the USMCA, which right, which is which is coming due and it's in process, and yeah, I think that's important to manufacturers mostly, but really that trickles down to dealers and consumers as well. So of course there are a couple of uh irons in the fire this year, so it's uh it's very interesting.

What Keeps Dealers Resilient

Jim Fitzpatrick 18:37

Sure, sure. Um, from a political standpoint, uh on a national or I should say global basis with the war in Iran right now and gas prices and such. Um, anything uh that keeps you up at night about the industry as a whole?

Mike Darrow 18:51

Not really. We've we've been through it all. So this is our 61st year in business, I'm second generation. So uh we went through uh uh 1979 and 80. Uh you may remember those days. Chrysler almost went out of business at that time. We had four Chrysler stores. Yep. Um we've had interest rates in the high teens, we've had oil embargoes, we've had cash for clunkers, we've had a pandemic. You know what? Nothing keeps me up at night anymore. We've been through it all, we've survived it. We're resilient group of uh dealers are very resilient, and like I said, entrepreneurial spirit. Yeah, we figure it out, and we we're survivors. That's and we will sell cars to consumers, we'll provide great customer service, we're gonna employ a lot of people, we're gonna support our communities, and it's I love the business and uh I'm proud to be a car dealer.

Final Thoughts And Sign Off

Jim Fitzpatrick 19:40

There you go. Well said. Mike Darrow, chairman of AIADA and uh president of the Russ uh Darrow Automotive Group. Thank you so much. Really appreciate all the time you've given us. I love your candid uh comments about the Chinese uh uh car situation, and uh and hopefully we can do a follow-up with you to see how this issue moves along.

Mike Darrow 19:59

Sounds great. Appreciate the opportunity.

Jim Fitzpatrick 20:01

Great, thank you so much.

Mike Darrow 20:03

Thanks for watching Inside Automotive with Jim Fitzpatrick.