For as long as the automotive industry has existed, there has been a continuous back-and-forth over its future. The emergence of electric vehicles has propelled this debate forward, akin to the Toyota (NYSE:TM) Prius and General Motors (NYSE:GM) EV1, spiced with a hearty mix of subsidies, practicality, demand, and regulations. The global landscape, marked by intensifying competition – especially from China – is reshaping long-established assumptions, and is paradoxically fostering alliances between traditional rivals.

Quote: “If there’s ways that we can partner with others, especially on technologies that are not consumer-facing, and be more efficient with R&D as well as capital, we’re all in,” GM (GM) CEO Mary Barra stated at the Wolfe Research Global Auto and Auto Tech Conference. “If you cannot compete fair and square with the Chinese around the world then 20% to 30% of your revenue is at risk,” Ford (NYSE:F) CEO Jim Farley echoed at the same event, indicating that the company might seek battery partnerships “with another OEM [automaker].”

Major auto industry players, including Tesla (NASDAQ:TSLA), are experiencing escalating pressure from leading Chinese electric vehicle manufacturers. Chief among them is the Berkshire Hathaway-backed BYD (OTCPK:BYDDY), which has surpassed its counterparts in sales figures, even outperforming Tesla (TSLA) in the previous year. While subsidies have contributed to its success, the new leader in the EV sector has the advantage of owning the entire battery supply chain, as well as benefiting from lower manufacturing expenses in China. “If there are no trade barriers established,” Elon Musk emphasized in a post-earnings call last month, “they will pretty much demolish most other car companies in the world. They’re extremely good.”

Additional concerns: The imposition of high tariffs on Chinese products during the Trump administration has shielded BYD from the U.S. market, but the company is contemplating a facility in Mexico. This development has raised concerns among American automakers, who fear BYD may leverage the USMCA trade agreement to penetrate the market. “Last year, 25% of all vehicles sold in Mexico were sourced in China,” Ford’s (F) Farley disclosed. “The world is changing.” In light of the $4.7 billion loss from its electric car unit in 2023, Ford has curtailed its EV investment and may pivot towards a plug-in hybrid or diversified strategy, a move that has long been endorsed by companies such as Toyota (TM). “The EV growth slowdown is good for Ford,” noted JR Research from SA Investing Group, “allowing it more time to milk its more profitable core business and work on its next-gen products.”

Electric Vehicles in Focus