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Michael Dunne on China’s Growing Threat to the U.S. Auto Industry

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Michael Dunne, CEO of Dunne Insights, examines China’s growing influence in the global automotive industry and what it could mean for U.S. automakers, dealers and policymakers.

In this episode of Inside Automotive, Dunne argues that China’s automotive strategy goes beyond traditional market competition, pointing to the rapid expansion of Chinese EVs, government support and control of critical supply chains. He also explores the national security implications of connected vehicles and the potential consequences of allowing Chinese automakers broader access to the U.S. market.

  • China’s global auto expansion and how its strategy differs from previous foreign automakers
  • The economic and national security risks tied to Chinese vehicles and connected-car technology
  • EV competition and the role of Tesla, software and autonomous driving
  • Tariffs and import quotas as potential tools to give U.S. automakers time to adapt
  • The challenges facing Detroit, including labor costs, overhead and operational efficiency
  • How U.S. manufacturing and technology could work together to compete globally

Dunne ultimately argues that American automakers must address their own structural challenges while preparing for a more competitive global market.

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.

Why Chinese Cars Spark Firestorms

Jim Fitzpatrick

Welcome to Inside Automotive with Jim Fitzpatrick. Hey everyone, Jim Fitzpatrick. Thanks for joining me on another edition of Inside Automotive right here at CBTnews.com. We have with us the one and only Mr. Michael Dunn of uh Dunn Insights. You've seen him here before on CBT News. When we need information on all things Chinese vehicles, and you know we talk a lot about Chinese vehicles here at CBT News. We turn to this gentleman because he is the foremost authority on all things Chinese cars and vehicles and trucks and you name it. So, Michael, thank you so much for joining us once again on the show.

SPEAKER_01

Always look forward to talking to you, Jim.

Jim Fitzpatrick

Great. So um I will tell you that uh I think we're up to like 17 or 18 million views of the last time you were on from the clips that we have on social media. There's a lot of people that feel very passionate about uh Chinese vehicles. You know, half of them say, let these vehicles in. We need the technology, we need the uh low-cost vehicle, supposedly it's a good car, BYD and others. Uh, and then the other half is like, do not let those vehicles in. You're gonna ruin the industry, you're gonna it's gonna be a security, the national security threat, um, so many other reasons as well. But uh, you in fact have written uh a book about this uh titled Um uh Car Wars, How China Seized the Auto Industry and

China’s Goal To Overwhelm Autos

Jim Fitzpatrick

How America Wins It Back. So uh thank you so much for uh spending some time with us again to talk about this. First of all, what's the motivation in writing it? I guess to tell us how we can navigate through this, and what do you want the reader to leave with?

SPEAKER_01

I think number one is I would hope that the American reader gets his mind around, her mind around the fact that what we're coming, what we're seeing coming out of China today is nothing like what we saw come out of Japan and Korea. We're at a magnitude and a scale and an ambition that's in a completely different realm. The Chinese ambition is to overwhelm and basically dominate the global auto industry. All cars, one day, just like all smartphones, would be made in China. Well, a consumer in the United States might go terrific. That means a lower cost car for me. Sounds good to me. Yeah, but on the other hand, what happens to the millions of jobs that in the thousands of companies that support our industry today? That's a big question. How are we going to buy those Chinese cars if we don't have an income? Secondly, China has already shown a propensity to use what they call choke points. So they dominate battery supply chains, they dominate some chip manufacturing, and they say in a crunch, guess what? We just won't supply those things to you anymore. So we don't want to find ourselves to wake up one day and find ourselves dependent on China for our cars, for our batteries, for the software. That's why. It isn't a question of, hey, let's keep the competition out. It's more like, what are their ambitions and what are the risks to us as a nation? Yes. That's the message in that book.

Jim Fitzpatrick

Are we afraid that China will invade the U.S. or have or or bomb us or take over the U.S.? I mean, do we think that that's really their ultimate goal here? Is world domination, not just from an economic standpoint, but legitimately, like physically, we want to we want to overthrow the U.S. government.

SPEAKER_01

From the inside out. The Chinese way is not to attack militarily unless they absolutely have to. But they'd prefer to work industries and countries from the inside out. So give you a great example. For the last several years, they've been working on Europe. Hey, Europe, you're all about green, right? Stay open. We can help you meet your green goals. Well, I got some numbers for you, Jim. This year, China will export more than a million cars to Europe. That's up from nothing a few years ago. 10% of the market. That's 10% there. UK, 20%. Mexico, 20%. Australia, 35%. Yeah. They're overwhelming industries and markets. Customer might be happy in the short term, but what are the long-term costs to a nation in terms of jobs and national security? That's the big question, Mark.

Jim Fitzpatrick

Sure, sure.

Jobs And Data As National Security

Jim Fitzpatrick

So are we doing this from how what percentage of this initiative to keep Chinese vehicles out is really focused on keeping the factories in America open and selling cars, dealerships as well as factories, and how much of it is really a national security threat?

SPEAKER_01

I'd say it's split right down the middle, Jim. Do you want to sustain the jobs? But there are real genuine threats when it comes to national security in terms of Chinese hardware and software can collect enormous, vacuum up enormous amounts of data, both personal and business and military, and then ship that back to China. We're naively very open society here. Things that we that the Chinese can do here, we could never do in China. For example, if you go to China tomorrow, Jim, you want to open up your computer and go, I'll Google that. Nope, there's no Google. I'll Gmail my buddy. Nope, uh, I'll check YouTube. No, that's not available. Facebook, no. How about Instagram? Uh no. New York Times, can I check? No. No. So uh, you know, you the Chinese come here and they go, Where are all the checkpoints? This is wide open. This is delicious. Sure. So the thing that makes America great also makes us enormously vulnerable. And I just want to, I don't want to sound over paranoid, just be realistic. If you look at what the Chinese have done in other industries beyond automotive, from solar panels to steel to shipbuilding to drones, they go in, massive capacity, price wars, they drive out the competition, and then they have more or less an oligopoly on it.

Jim Fitzpatrick

Yeah.

SPEAKER_01

That's great in the short term, maybe, but what are the long-term implications? Let's just be less naive. Let's be open eyes about this opportunity. And the Chinese are very good. They're producing great cars, and they work really hard. So it's kind of hard for us to imagine. Oh, what's the downside to

Huawei Precedent And Autonomy Advantage

SPEAKER_01

this proposition?

Jim Fitzpatrick

Right. Have you seen the this um the this ban? Right now we're looking at a ban, obviously, Senator Bernie Moreno out of Ohio, along with Senator Slotkin out of Michigan, uh, two states I might add that have got a pretty strong contingency of uh U.S. factories for automotive. Um do you see this? Uh is there any other industry that you have seen where they've banned Chinese products to um so so that the U.S. industry could survive?

SPEAKER_01

I think Huawei is a great example. Okay. Huawei in terms of telecom equipment and phones. So we don't see Huawei phones. You go anywhere outside of the United States, you're gonna see a lot of Huawei phones. So there is precedent for that. Um the other silver lining here, Jim, you mentioned the Midwest. Yes, that's true. Protect those jobs, sustain that industry. But if we look forward, where's the industry going overall in terms of transportation mobility? It's going to autonomy. And this is this is the silver lining for the United States. West Coast companies, Waymo, Tesla, Zooks, Nvidia, these have the crown jewels, the underpinnings of the future of transportation here in the United States. So think of the future American auto industry as sort of led by the West Coast, supported by manufacturing out of the Midwest. If we don't have the manufacturing, we can't really build our own autonomous car. So we need both of those going forward.

Jim Fitzpatrick

Right, right. So we don't want and and is it your are you saying that if we were to allow the U.S. in, and and I've proposed in

Limits On Imports As A Pressure Valve

Jim Fitzpatrick

in other conversations here on CBT News with other people about this very topic that we allow uh a certain number of vehicles in the way that we saw the Japanese vehicles coming in in the late 70s, early 80s. I happen to be selling Toyotas at the time, and uh we couldn't get enough Toyotas because there was a limit. There was just so many, you know, a couple of hundred thousand or whatever it was at the time. And they said, that's it. That's all you're getting. Is do you see a world where we could survive with just two, three, four hundred thousand vehicles out of a SAR of 16.3, 16.4, that's not that's not a real big threat. Do it do you see that as a possibility?

SPEAKER_01

That would be an option. Say you you you can you're we're permitting you access to the market, but we're going to monitor and limit just how quickly you grow here because you might just come in and start buying market share. Right. So absolutely. And if you look at Japan, that's a good test case. They're allowing Chinese cars to come in, but they're checking them very closely. And if it starts to spread like wildfire, they'll have measures in place to say, well, let's slow that down. So that's an option. It's it's probably if it's probably unrealistically unrealistic to expect that we won't have Chinese cars here ultimately. But before we open the door, let's get as prepared as possible. And that means getting as competitive as possible. I I if you look at other industries, especially Europe right now, you saw the headlines. Volkswagen's planning to lay off 100,000 people between now and 2030, closed four plants in Germany, first time since World War II. Honda, which is taking heat from the Chinese in Southeast Asia, South America, Australia, guess what? They declared a loss for the first time in their history since World War II. Right. So these things are the it's not imaginary, the threat, and it isn't sort of a gradual, oh, a new competitor, that's fun. It's more like why win you lose.

Jim Fitzpatrick

Well, but but if you were to look at other industries, okay, and you said, well, maybe this is just uh an evolution here. Maybe this is the these are the changing times that we're in. I mean, uh the from the horse and carriage to the automobile. You know, obviously people that build carriages said, Well my God, we can't allow cars. We got horses to sell. I mean, I I'm taking a you know, kind of a uh, you know, a funny part of this, but uh but at the end of the day, you know, that this is isn't this kind of technology and the way that it works? I mean, it's just kind of like, oh my gosh, let's keep Honda alive and let's keep this alive. The other thing that I'd add to that too is the fact that are are we allowing the domestic car makers here, the GMs, the Fords, the Stellanus brands of the world, to go, oh, we're safe. We don't have to deal like Europe has to deal or or Mexico or or Canada with that whole China thing. We can keep delivering cars at the rate of fifty thousand dollars a pop, okay, and and you need one every three years or four years, maybe not as much anymore. But um, are we aren't we kind of protecting the auto industry in the U.S. by saying, look, we're gonna we're gonna make sure you guys are good. Just keep cranking out those expensive vehicles. Again, devil's advocate.

SPEAKER_01

You were trained as a lawyer. I think you were trained as a lawyer. You make a very strong argument.

SPEAKER_00

So I'm a lawyer for the Chinese government. No, absolutely not.

SPEAKER_01

Absolutely not.

Jim Fitzpatrick

No, I'm just saying because when when you the reason I bring these up is when you read the comments for you. When you read the comments from the auto industry and from consumers on our website, they are they want to know. They're like, wait a minute. The rest of the world is getting these inexpensive cars, great technology, beautiful design, and and yet we're not getting them. So, you know, there's a lot of there's a lot of consternation about this.

SPEAKER_01

Jim, here's a counter question. I'm going to go right to the heart of the matter. Here's the irony. Tesla is an American company that produces arguably the very best electric cars in the world with the best technology by far. And if you ask the bleeding Chinese car makers, the CEOs, the founders, I talk to them all the time. Who do they admire and respect? Tesla. So we have it right in our backyard, but we're like, no, not Tesla, no, Tesla, no. Right. Why not Tesla? Right. We can do this ourselves. We do do it ourselves in the form of Tesla, but somehow in the United States, oh, the Chinese say the moon must be more full on the other side of the world. Right. The moon is fuller over there. Yeah. I trust me when I tell you there's no Chinese car better than Tesla today. And if you ask the founder of Xiaomi or X Pung or BYD, they know Tesla's number one. And a little bit sad or kind of confusing that Americans don't understand or realize or appreciate that. We're like, well, let's let the Chinese cars come in because they're the best. No, why don't we just buy the Tesla at all-time best prices? So there's a little bit of a American auto industry, Detroit, but hold on, by the way, there's this West Coast phenomenon just coming up, and we could really nurture that and build a great industry around those companies.

Jim Fitzpatrick

So it if we're saying that if we allow the Chinese to come in, aren't we then also acknowledging the fact that it's a better-built

Subsidies Price Wars And Tariff Options

Jim Fitzpatrick

car for a much lower price than what the Americans are able to build and deliver? Because if if you're in a free market, doesn't the market dictate who's going to be driving these vehicles? And we're saying, oh no, no, we don't trust the American consumer. Those cars hit the shores, they're definitely going for those cars. They're not going to be patriots about it. They're going to be loyal to their pocketbook and their ego to be driving these cars and forget the U.S.

SPEAKER_01

uh brands. Okay. Question for you. Is it a market economy? Are the Chinese producing cars from a market economy, or is there something else going on?

Jim Fitzpatrick

Of course, is there something else? There's the government that that right?

SPEAKER_01

So there's there's no such thing as a free lunch. Why would the government be doing this?

Jim Fitzpatrick

So if in the event that the uh the Chinese car, BYD, let's say, was not owned by the Chin Chinese government, but maybe another entity in China, company, whatever, Gili, is it Geely or Geely? Geely? Geely, Gili. Yeah, yeah. If it was owned by the company like that and they came over at the same market price as a Tesla or as um, you know, a Cadillac or a Chevy or whatever the case might be, is that something that that we're saying, look, then it is a level playing field, then it is an open market in the sense that the car is going to be fairly priced in in comparison to the other vehicles in its class. You're you're okay with that?

SPEAKER_01

Absolutely okay with that. Okay. Absolutely. Bring it in. Yes.

Jim Fitzpatrick

And so can't we govern that can't we govern that with with uh tariffs to say, oh, Chinese vehicle? Yeah, 100% tariff, 200, whatever it might be, to bring that to bring the cost of that car up to a comparable price.

SPEAKER_01

That's also possible. I mean, we have tariffs in place now. If they were at 50% gym, we'd already see Chinese cars on the road here. Yeah. So they can find a way. Keep in mind their ambition is to win sales. Yeah. You know, one of the things going on is they're driving down the value and the margins at home and abroad. They're exporting, they have zero margins at home. No one's making money in China. So they're going overseas and they're saying, oh, that was fun. Let's see if we can duplicate that experience overseas. And that's what's that's what's really keeping CEOs awake at night. It isn't so much, oh, we have a competitor. We have a competitor willing to drive margins to zero and to suffer for a long time, suffer longer than we can. Yeah. What do we do about that?

Jim Fitzpatrick

Yeah. Jim Farley, as you know, a few weeks back said that he's all in favor of um of Senator Marino's proposal here and uh for this bill to pass. However, he felt as though, I think he used the words inevitable, that they will that these Chinese vehicles will come to the U.S. one day. Um uh he in fact, you know, now we see Ford trying to race like hell to build a $30,000 EV pickup. And uh and so so I I I think even the threat of this couldn't be a good thing for American consumers in terms of what comes out of Detroit.

SPEAKER_01

Yes, all the information on the internet about these cars and the videos, definitely the consumer, American consumers waking up to, oh, we have some potential other choices out there. Uh we expect more from the companies that are now operating in the U.S. Yeah. So I think the important distinction is what are the ambitions of we're competing against China, not against individual companies. And that's where things get hard. Yeah. So you go, okay, I just let them in. Well, who are we letting in and to what end? Yeah. That's the question. Right, right. So so And and as an individual consumer, Jim, you're like, yeah, whatever.

SPEAKER_00

I just wanted Yeah, whatever. I want my cheap car. Right?

Jim Fitzpatrick

I shouldn't say cheap, inexpensive.

SPEAKER_01

Uh inexpensive, very affordable. Wow. Very affordable. Great. The Australians are buying them like crazy, a third of new car sales in Australia. That's right.

Jim Fitzpatrick

My money is my cell phone is built in China, and it's got all of the information. My whole life is on this phone as it is with many Americans, and yet it was built in China. And they say if it was built in the U.S., it'd be three times as much, right?

SPEAKER_01

That's right. Now, there's a cost associated with that. At any time, China could cut off cut Apple off. Are we are we go okay with that?

Jim Fitzpatrick

It's a good point. But no, but I guess the bigger question is what would be their their motive in in doing any of this? You know what I'm saying? You know what I'm saying? Like if you look, if you do a little research and you say, okay, how many countries has China,

Low Prices Today Dependence Tomorrow

Jim Fitzpatrick

you know, either bombed or invaded or taken over in the last 10 or 20 years? It's zero. These guys don't seem to be aggressors. So, but you're saying they're coming in under the radar from an economic standpoint.

SPEAKER_01

Have you checked the South China Sea recently? Yeah. They're building islands there, Jim. They don't, their way is not to say I'm going to cut attack militarily and invade. It's more like I'm going to put pressure on you in such ways that you are going to conform to my narrative and the way I want to do things. I didn't bomb you. I didn't attack. Right. But I shaped you. Yeah.

unknown

Yeah.

SPEAKER_01

And you went along with it. Right. You were you were along for the ride. You actually won it this way. That's right. We're addicted to low prices. Independent, and we think, wow, this is bliss. Let's keep doing more of this. That's right. Until one day we wake up and we go, wow, how did this happen?

Jim Fitzpatrick

How did we get here? Did last time you went to buy a TV, did you look at RCAs and Zenith for your beautiful TV?

SPEAKER_01

Right? So, so on the in the one camp, you have American consumers who, in my mind, have been spoiled for choice for so long that we have we've become a little bit myopic. Like if it's a better product at a lower price, we deserve to have that uh to help with whatever the consequences might be. Right. But we have to broaden the scope a little bit and go, let's think about the big picture. What are all the elements in play here? And what's the cost of me buying a Chinese car instead of a Tesla? Right. What does that mean for our my nation? That's all. Right. What does that mean for my nation?

Jim Fitzpatrick

Did you say?

SPEAKER_01

Yeah. As a citizen of the United States and a democratic capitalist society and all the freedoms we enjoy, can we imagine a future where someone defines what we can get in the internet? You want you like your YouTube, right? Or your Instagram.

Jim Fitzpatrick

Sorry, that's not that's not going to be allowed anymore. But then we haven't even spoken about the parts situation to build these American cars. You know, that we we are reliant on China just to build the American car that American consumers are driving and feeling so good about being so patriotic about that they'd rather be American, buy American, right? But not so fast. You break that vehicle down, a lot of it's coming back.

SPEAKER_01

Right, right.

Jim Fitzpatrick

What and and my final

UAW Costs Management Bloat And Reality

Jim Fitzpatrick

question, because I thank you for all the time that you've given us today, where where is the UAW? I mean, I know where they are on this, but what role do they play? Obviously, you know, the the I think it's one of the first places that uh auto manufacturers point to and they say, Where's the cost? But you know, how did we get to fifty thousand dollars for the price of a car? And they go, hey, talk to these workers on the line, talk to these workers in the factory and in the executive offices and everything else. They're all making a ton of money, they're living longer, the cost to keep these people and their uh pensions and everything else are uh is piling up. I mean, it's it's literally thousands of dollars a car, isn't it? For those legacy costs.

SPEAKER_01

And I would look at I would look at UAW costs, I would also look at the cost of management within the Detroit 3. Oh, yeah. When I worked inside GM, I was I was stunned at the number of people and the amount of money that's made. So I'd look at both camps, both on the line and in the offices. I agree. Uh we have to come to terms with the reality that competition is global and we cannot coast on former glories forever. That's right. That's right. It doesn't work that way.

Jim Fitzpatrick

Speaking of former glories, 20 years, in the last 20 years, over 50 million uh Chevies Um have been sold in China, right? I mean that's Yeah, great, crazy.

SPEAKER_01

Buick Chevies, yes, Cadillacs. Um, and now, you know, put a number to it at its peak. GM sold four million cars a year. That's in 2017. This year there'll be just over a million. So that it's pretty clear what's going on. Like the foreigners are being invited to see their way to the door, and in the meantime, the Chinese are coming in here and saying they'd like to have a shot. So there you go. It's confusing because you'd say, well, let them let the best band win, but we're not working uh apples to apples in terms of how our or how our societies are organized.

Jim Fitzpatrick

Right, right. I and I I totally get that. There's no question about it. But maybe a couple hundred thousand vehicles. Maybe a couple hundred thousand to your friends and family.

SPEAKER_00

That's right. Certain locations around the country. That's right. That's right. Possibly,

Final Takeaways And Book Link

SPEAKER_00

yes.

Jim Fitzpatrick

Michael Dunn, CEO of Dunn Insights, his new book is Car Wars. I highly recommend you get your copy. In fact, right below the video you're watching, there is a link to do just that. It's how China sees the auto industry and how America wins it back. He's gonna lead the way here, folks. So, Michael, thank you so much for joining us on the show. It's always great catching up and getting your your take on this, because uh we always turn to you. If it's China vehicles, we're bringing in Michael Dunn. So thanks so much. Thank you, Jim. And by the way, you guys might also uh Wall Street Journal. Um, we can't afford to ignore China's auto threat. He had a nice article in the Wall Street Journal. Um, so congrats on that as well. So uh word is out. You're the man that we all turn to.

SPEAKER_01

It's all happening, Jim. It's all happening.

Jim Fitzpatrick

There you go. All right, thanks so much.

SPEAKER_00

Thank you. Thanks for watching Inside Automotive with Jim Fitzpatrick.