Chinese automakers have taken a major share in Europe, the U.K., and Australia. U.S. dealers are now weighing what happens if those brands gain a foothold here. On today’s edition of CBT Live, Michael Dunne, CEO of Dunne Insights and author of Car Wars, breaks down what Europe’s experience means for U.S. dealers.
More than a million Chinese cars will ship into European markets, Dunne said after returning from Munich. Volkswagen plans to lay off more than 100,000 people. Suppliers such as ZF, Bosch and Continental face tens of thousands of cuts. Chinese brands hold about 20% of new car sales in the U.K. They hold about a third in Australia, and both figures were near zero a few years ago.
Dunne said China’s rise traces to a decision 10 years ago to open its auto industry to tech companies. Those companies brought capital and talent that made vehicles smarter and better designed. Detroit has been slower to partner with outside tech firms, he said. Legacy automakers need to work more closely with West Coast companies.
Dealers with a Chinese franchise would likely see healthy margins for the first year or so, Dunne said. After that, Chinese automakers tend to push product hard, as they have in other markets. Margins compress and enterprise value falls. Chinese automakers also talk privately about going direct within about five years, he said. That would erode the leverage dealers hold today as advocates with local and federal governments.
Dunne wrote Car Wars to warn that China has gone after one industry at a time. Targets have included solar panels, steel, shipbuilding and batteries. The pattern is to build capacity, start price wars and compress margins until rivals exit. The U.S. can compete, but needs to start preparing now, he said.
