While the automotive industry scrambles to decipher China’s rapid rise, Michael Dunne argues that what is happening is not just routine commercial expansion, but an industrial takeover.
Joining us on today’s Inside Automotive episode is Michael Dunne, CEO of Dunne Insights, Author of the upcoming book Car Wars: How China Seized the Auto Industry –and How America Can Win It Back, and Author of the recent Wall Street Journal op-ed We can’t afford to Ignore China’s Auto Threat,” to discuss a candid wake-up call to American dealers, executives, and policymakers.
For observers who assume Chinese automakers will follow the slow, steady playbook used by Japanese and Korean brands in past decades, Dunne cautions against nostalgia. He says that China’s strategy operates on a scale and ambition never seen before.
"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..."
Instead of waging direct military or confrontational battles, China prefers to hollow out key industries from the inside out. Dunne points to Europe as the prime example, saying Beijing pitched its EVs to European nations as the fastest track to meeting their ambitious climate goals. The strategy, he said, paid off when China went from virtually no market presence to exporting over one million cars to Europe in a single year, capturing roughly 10% of the market. Elsewhere, the numbers are even higher, with Chinese models now accounting for 20% of sales in the UK and Mexico, and a staggering 35% in Australia.
He notes that the impact on legacy manufacturing is also already becoming evident. For instance, Volkswagen recently unveiled plans to shut down factories in Germany for the first time since World War II. Meanwhile, Honda experienced unprecedented losses across key Asian markets as it feels the squeeze from intense Chinese pricing pressure.
The actual costs of cheap cars
For American consumers facing record-high domestic vehicle prices averaging near $50,000, cheap, feature-packed Chinese EVs sound like a win. But Dunne highlights the hidden long-term costs of short-term savings:
- Job losses & industry collapse: Heavily subsidized, state-backed Chinese automakers operate with zero profit margins at home, using those state safety nets to flood foreign markets and undercut local competition. He says that once domestic manufacturing collapses, thousands of supply-chain companies and millions of American jobs will go with it.
- National security & data harvesting: Connected vehicles collect massive streams of location, telemetry, and personal data. Western nations operate as open, accessible societies, while China strictly bans Google, YouTube, Instagram, and major foreign media within its borders. Allowing data-connected Chinese hardware across the U.S. creates an unprecedented intelligence vulnerability.
- Choke point dependencies: China already controls critical supply chains for battery materials and specialized microchips. Handing over the vehicle market, he says, would deepen America’s dependence on a foreign strategic rival for basic mobility.
Notably, Dunne observed that the very traits defining America’s strengths also expose it to significant risks. He described a pattern where competitors aggressively expand production and initiate price wars to eliminate opposition, ultimately securing market control. However, he does warn that the U.S. must adopt a more pragmatic view of these strategies.
Tesla, West Coast tech, and the Midwest Engine
According to Dunne, the core irony of the Chinese vehicle debate in the U.S. is that America already builds the gold standard of electric vehicles; he asserts that we just don’t always act like it.
Dunne asserts, “If you ask the bleeding Chinese car makers, the CEOs, the founders… Who do they admire and respect? Tesla,” adding that, “If you ask the founder of Xiaomi or Xpeng or BYD, they know Tesla’s number one…” Additionally, he says he envisions the future of the American auto industry as a vital partnership between West Coast tech innovation and Midwest manufacturing strength. He says firms like Tesla, Waymo, Zoox, and Nvidia possess the “crown jewels” of autonomous driving and mobility software. Yet software alone isn’t sufficient, as America must also maintain its factory infrastructure to build autonomous vehicles, noting that both elements are essential for success.
Can tariffs & quotas buy time?
When asked whether the U.S. can simply block Chinese vehicles or balance the playing field through strict tariffs, Dunne acknowledged that strict trade barriers buy essential time. Potential managed-access options, such as capping imports to a strict quota of 200,000 to 400,000 vehicles per year, could allow Chinese options to enter without completely destroying domestic market dynamics.
However, Dunne stresses that protectionism alone won’t solve Detroit’s internal issues. Between legacy UAW labor agreements and thick layers of executive management overhead, U.S. legacy automakers must trim excess costs and streamline operations if they expect to compete globally.
Dunne concluded with the statement that “We have to come to terms with the reality that competition is global, and we cannot coast on former glories forever.”
