Chinese automakers are building cheap, well-equipped vehicles and selling them across Europe, Mexico, and now Canada. As the average price of a new car in the U.S. nears $50,000, cheaper alternatives from China are tempting buyers. But U.S. automakers, dealers and many politicians don’t want to see Chinese cars on American roads, citing state-backed pricing and potential national security risks from the cars’ onboard data and cameras.
Mike Darrow, Chairman of the American International Automobile Dealers Association (AIADA) and President of the Russ Darrow Automotive Group, says cheaper Chinese vehicles may look appealing to U.S. buyers, but the risks outweigh the rewards. Darrow joins us on this episode of Inside Automotive to discuss what is really at stake, why the industry wants guardrails and how the affordability debate fits into the larger picture.
Security risks vs. affordability
Darrow admits that vehicle affordability is a growing concern in the U.S., but argues that the risks to national security run deeper than sticker price. He says Chinese vehicles collect data through onboard systems and cameras, and questions where that information goes.
“Well, affordability is an issue, but at what cost, right? So national security. 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, that we all know,” Darrow said.
Darrow also expressed concern over how the Chinese vehicles are priced, calling it predatory. Chinese automakers benefit from heavy state backing, which lets them undercut rivals on price.
"The vehicles ... are priced artificially low. The warranties are artificially long. The incentives are artificially high. And they are buying market share. It's a predatory competition."
Heavy tariffs could offset the pricing issue, but Darrow says that doesn’t fix the national security issues.
“All of a sudden if we wake up in 20, 30 years, in China, the Chinese auto manufacturers with the Chinese government have 50, 60 market share in the U.S., that’s a problem,” Darrow said.
Pressure, not China, is the answer to affordability
If Chinese cars stay out, domestic automakers face less pressure to lower prices. But Darrow says that doesn’t let them off the hook. He says the answer to the affordability issue isn’t letting China in, but rather keeping pressure on the automakers already in the U.S. to make affordable vehicles.
“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 decontent them, or limit some of the regulatory issues around their auto manufacturing,” Darrow said.
He says the burden falls on domestic and import brands alike, naming Toyota, Honda and Kia. U.S. makers can also learn from Chinese efficiency, just as China once learned from Detroit, he says.
No clear path in, even with guardrails
Some have suggested that guardrails, including capped volume, franchise-only sales, U.S. factory commitment, and tariffs, could open a path forward. But even with those guardrails in place, Darrow doesn’t think it’s enough to open the door.
“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,” Darrow said.
"This industry is too large to just open the door and let them flood in, for sure. So we've really got to proceed with caution."
Beyond national security, Darrow says it would be detrimental to the industry in the U.S., but stopped short of saying it could never happen.
Navigating the road ahead
Looking ahead, Darrow says AIADA’s focus stays on dealer engagement. The group pushes for lawmaker visits to dealerships and brings dealers to Washington so their voices reach the table. He points to a coming visit from Congressman Bryan Steil to his Kia store in Waukesha, Wisconsin, and names the USMCA renewal as another priority this year.
After 61 years in business, Darrow says little shakes him these days. He has seen oil embargoes, high interest rates, cash for clunkers, and a pandemic. He says dealers will survive today’s issues just like they did in the past.
“Nothing keeps me up at night anymore. We’ve been through it all. We’ve survived it. We’re resilient. Dealers are very resilient,” Darrow said.
