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.”
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 Dunne of Dunne 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.
Michael Dunne: Always look forward to talking to you, Jim.
Jim Fitzpatrick: I think we're up to something like 17 or 18 million views from the last time you were on, from the clips that we have on social media. There are a lot of people who feel very passionate about Chinese vehicles. Half of them say, let these vehicles in. We need the technology, we need the low-cost vehicle. Supposedly it's a good car, BYD and others. And then the other half is like, do not let those vehicles in. You're going to ruin the industry. It's going to be a national security threat, and so many other reasons as well.
But you, in fact, have written a book about this, titled "Car Wars: How China Seized the Auto Industry and How America Wins It Back." So thank you for 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?
Michael Dunne: I think number one, I would hope that the American reader gets his mind around, her mind around, the fact that 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 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. 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 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? That's the message in that book.
Jim Fitzpatrick: Are we afraid that China will invade the U.S., or bomb us, or take over the U.S.? Do we think that that's really their ultimate goal here, world domination? Not just from an economic standpoint, but legitimately, like physically, we want to overthrow the U.S. government.
Michael Dunne: From the inside out. The Chinese way is not to attack militarily unless they absolutely have to. They'd prefer to work industries and countries from the inside out.
So I'll 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've 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. Ten percent of the market. That's 10% there. UK, 20%. Mexico, 20%. Australia, 35%. They're overwhelming industries and markets. The 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: 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?
Michael Dunne: 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. They can vacuum up enormous amounts of data, both personal and business and military, and then ship that back to China.
We're a naively very open society here. Things 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. No, there's no Google. I'll Gmail my buddy. No. I'll check YouTube. No, that's not available. Facebook. No. How about Instagram? No. New York Times, can I check? No.
So the Chinese come here and they go, where are all the checkpoints? This is wide open. This is delicious.
Jim Fitzpatrick: Sure.
Michael Dunne: So the thing that makes America great also makes us enormously vulnerable. And 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 with massive capacity, price wars, they drive out the competition, and then they have more or less an oligopoly on it.
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-eyed 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 this proposition?
Jim Fitzpatrick: Right now we're looking at a ban, obviously, Senator Bernie Moreno out of Ohio, along with Senator Slotkin out of Michigan, two states, I might add, that have got a pretty strong contingency of U.S. factories for automotive. Is there any other industry that you have seen where they've banned Chinese products so that the U.S. industry could survive?
Michael Dunne: I think Huawei is a great example. 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 going to see a lot of Huawei phones. So there is precedent for that.
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 is the industry going overall in terms of transportation mobility? It's going to autonomy. And this is the silver lining for the United States. West Coast companies, Waymo, Tesla, Zoox, NVIDIA, these have the crown jewels on 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: I've proposed in other conversations here on CBT News with other people about this very topic, that we allow a certain number of vehicles in, the way that we saw the Japanese vehicles coming in in the late '70s, early '80s. I happened to be selling Toyotas at the time, and we couldn't get enough Toyotas because there was a limit. There was just so many, a couple of hundred thousand or whatever it was at the time. And they said, that's it. That's all you're getting. Do you see a world where we could survive with just two, three, four hundred thousand vehicles out of a SAAR of 16.3, 16.4? That's not a real big threat. Do you see that as a possibility?
Michael Dunne: That would be an option. Saying, 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.
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 probably 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. 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.
So these things, it's not imaginary, the threat. And it isn't sort of a gradual, oh, a new competitor, that's fine. It's more like, I win, you lose.
Jim Fitzpatrick: But if you were to look at other industries and you said, well, maybe this is just an evolution here, maybe these are the changing times that we're in. From the horse and carriage to the automobile. Obviously people who built carriages said, well, my God, we can't allow cars, we've got horses to sell. I'm taking kind of a funny part of this, but at the end of the day, isn't this just how technology works?
The other thing I'd add to that too is, are we allowing the domestic car makers here, the GMs, the Fords, the Stellantis brands of the world, to go, oh, we're safe. We don't have to deal like Europe has to deal, or Mexico or Canada, with that whole China thing. We can keep delivering cars at the rate of $50,000 a pop. And you need one every three years or four years, maybe not as much anymore. But are we kind of protecting the auto industry in the U.S. by saying, look, we're going to make sure you guys are good, just keep cranking out those expensive vehicles? Again, devil's advocate.
Michael Dunne: You were trained as a lawyer. I think you were trained as a lawyer. You make a very strong argument.
Jim Fitzpatrick: I'm a lawyer for the Chinese government. No, absolutely not. I'm just saying, the reason I bring these up is when you read the comments from the auto industry and from consumers on our website, 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 yet we're not getting them. So there's a lot of consternation about this.
Michael Dunne: 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 leading Chinese car makers, the CEOs, the founders, I talk to them all the time, who do they admire and respect? Tesla.
We have it right in our backyard, but we're like, no, not Tesla. Why not Tesla? We can do this ourselves. We do do it ourselves, in the form of Tesla. But somehow in the United States, the moon must be more full on the other side of the world.
Jim Fitzpatrick: Right. The moon is fuller over there.
Michael Dunne: Trust me when I tell you, there's no Chinese car better than Tesla today. And if you ask the founder of Xiaomi or XPeng or BYD, they know Tesla's number one. And it's 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 an 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 it.
Jim Fitzpatrick: So 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 car for a much lower price than what the Americans are able to build and deliver? Because 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. brands.
Michael Dunne: Okay, question for you. Is it a market economy? Are the Chinese producing cars from a market economy, or is there something else?
Jim Fitzpatrick: Of course there's something else. There's the government.
Michael Dunne: Right. So there's no such thing as a free lunch.
Jim Fitzpatrick: Why would the government be doing this? So in the event that the Chinese car, BYD, let's say, was not owned by the Chinese government, but maybe another entity in China, a company, whatever. Geely. Is it Geely or Geely?
Michael Dunne: Geely.
Jim Fitzpatrick: Geely. If it was owned by a company like that, and they came over at the same market price as a Tesla, or as a Cadillac or a Chevy or whatever the case might be. Is that something 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 comparison to the other vehicles in its class? You're okay with that?
Michael Dunne: Absolutely okay with that. Absolutely. Bring it in.
Jim Fitzpatrick: So can't we govern that with tariffs? To say, oh, Chinese vehicle? 100% tariff, 200%, whatever it might be, to bring the cost of that car up to a comparable price.
Michael Dunne: That's also possible. I mean, we have tariffs in place now. If they were at 50%, Jim, we'd already see Chinese cars on the road here. So they can find a way.
Keep in mind, their ambition is to win sales. One of the things going on is they're driving down the value and the margins at home and abroad. 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 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.
Jim Fitzpatrick: What do we do about that? Jim Farley, as you know, a few weeks back said that he's all in favor of Senator Moreno's proposal here, and for this bill to pass. However, he felt as though, I think he used the word inevitable, that these Chinese vehicles will come to the U.S. one day. In fact, now we see Ford trying to race like hell to build a $30,000 EV pickup. And so I think even the threat of this could be a good thing for American consumers in terms of what comes out of Detroit.
Michael Dunne: Yes. All the information on the internet about these cars, and the videos, definitely American consumers are waking up to, oh, we have some potential other choices out there. We expect more from the companies that are now operating in the U.S.
So I think the important distinction is, what are the ambitions? We're competing against China, not against individual companies. That's where things get hard. So you go, okay, I'll just let them in. Well, who are we letting in, and to what end?
Jim Fitzpatrick: That's the question.
Michael Dunne: And as an individual consumer, Jim, you're like, yeah, whatever, I want my cheap car. I shouldn't say cheap. Inexpensive.
Jim Fitzpatrick: Inexpensive. Very affordable.
Michael Dunne: Wow, that's great. Australians are buying them like crazy. A third of new car sales in Australia.
Jim Fitzpatrick: 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?
Michael Dunne: That's right. Now, there's a cost associated with it. At any time, China could cut Apple off. Are we okay with that?
Jim Fitzpatrick: That's a good point. But I guess the bigger question is, what would be their motive in doing any of this? If you do a little research and you say, okay, how many countries has China 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. But you're saying they're coming in under the radar from an economic standpoint.
Michael Dunne: Have you checked the South China Sea recently? They're building islands there, Jim. Their way is not to say, I'm going to 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 you. But I shaped you.
Jim Fitzpatrick: And you went along with it.
Michael Dunne: Right. You were along for the ride. You actually want it this way. That's the Chinese way. We're addicted to low prices. We are addicted, we are dependent, and we think, wow, this is bliss. Let's keep doing more of this.
Jim Fitzpatrick: That's right.
Michael Dunne: Until one day we wake up and we go, wow, how did this happen? How did we get here? Last time you went to buy a TV, did you look at RCA and Zenith for your beautiful TV?
Jim Fitzpatrick: So in the one camp, you have American consumers who, in my mind, have been spoiled for choice for so long that we have become a little bit myopic. Like, if it's a better product and a lower price, we deserve to have that, to hell with whatever the consequences might be.
Michael Dunne: Well, 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? What does that mean for my nation? That's all.
Jim Fitzpatrick: What does that mean for my nation, did you say?
Michael Dunne: 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 on the internet? You like your YouTube, right? Or your Instagram? Sorry, that's not going to be allowed anymore.
Jim Fitzpatrick: But then, we haven't even spoken about the parts situation to build these American cars. We are reliant on China just to build the American car that American consumers are driving and feeling so good about, and so patriotic about, that they'd rather buy American. But not so fast. You break that vehicle down, a lot of it's coming from China.
Michael Dunne: We've had our cake and been eating it too. I think the short answer is, we need to re-industrialize, Jim, if we want to continue to be a superpower and a strong nation. We've been really sort of having it both ways, and eventually that comes home to roost.
Jim Fitzpatrick: And my final question, because I thank you for all the time that you've given us today. Where is the UAW? I know where they are on this, but what role do they play? I think it's one of the first places that auto manufacturers point to, and they say, where's the cost? How did we get to $50,000 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 pensions and everything else is piling up. It's literally thousands of dollars a car, isn't it, for those legacy costs?
Michael Dunne: I would look at UAW costs. I would also look at the cost of management within the Detroit 3. Layers of management. When I worked inside GM, I was stunned at the number of people and the amount of money that's made. So I'd look in both camps, both on the line and in the offices.
Jim Fitzpatrick: I agree.
Michael Dunne: We have to come to terms with the reality that competition is global, and we cannot coast on former glories forever.
Jim Fitzpatrick: That's right. It doesn't work that way.
Michael Dunne: Speaking of former glories, in the last 20 years, over 50 million Chevys have been sold in China.
Jim Fitzpatrick: I mean, that's crazy.
Michael Dunne: Buicks, Chevys, Cadillacs. And now, to 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 it's pretty clear what's going on. 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 it's confusing, because you'd say, well, let the best man win. But we're not working apples to apples in terms of how our societies are organized.
Jim Fitzpatrick: Right. And I totally get that. There's no question about it. But maybe a couple hundred thousand vehicles.
Michael Dunne: Maybe a couple hundred thousand. Your friends and family.
Jim Fitzpatrick: That's right. At certain locations around the country.
Michael Dunne: That's right. Possibly. Yes.
Jim Fitzpatrick: Michael Dunne, CEO of Dunne 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 Seized the Auto Industry and How America Wins It Back." He's going to 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 take on this, because we always turn to you. If it's Chinese vehicles, we're bringing in Michael Dunne. So thanks so much.
Michael Dunne: Thank you, Jim.
Jim Fitzpatrick: And by the way, you guys might also look at the Wall Street Journal, "We Can't Afford to Ignore China's Auto Threat." He had a nice article in the Wall Street Journal, so congrats on that as well. Word is out. You're the man that we all turn to.
Michael Dunne: It's all happening, Jim. It's all happening.
Jim Fitzpatrick: There you go. All right, thanks so much.
Michael Dunne: Thank you.
Transcript lightly edited for clarity. Speaker attributions verified against the recording.
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