China’s electric vehicles are accelerating, leveraging a playbook built on scale, vertical integration, and blisteringly fast product cycles — driving right around Washington’s moves to wall off the giant US market.
American protectionism is not translating into competitiveness. US carmakers are taking giant write-offs, ceding global relevance, and concentrating production on gas-guzzling SUVs that only Americans buy.
The rest of the world, angered by the US’s aggressive trade policies, is easing the road ahead for Chinese EVs. China’s BYD surpassed Tesla last year to become the world’s largest seller of battery electric vehicles, delivering roughly 2.26 million EVs, a near 28% year-on-year increase. Tesla’s deliveries fell to about 1.64 million, marking its second consecutive annual sales decline.
China’s lead on battery production amplifies this advantage. Chinese firms account for the majority of global lithium-ion cell manufacturing, squeezing American and European makers on both costs and capabilities.
China’s dominance stems from a powerful incremental learning curve and industrial footprint, not just subsidized production. China’s auto market is the world’s largest, accounting for more than 38% of global sales as of late 2025, dwarfing the US (about 18%) and Europe (the EU and the UK combined register at 17%). To put this in perspective, China is producing nearly as many cars as the EU, Japan, and the US combined.
In the US, worries about driving range and political flipflops have slowed EV adoption. Key federal tax credits for EVs expired in late 2025. Once the credits disappeared, US new vehicle sales plummeted from 10.5% in the third quarter to 5.7% in the fourth.
US measures to insulate the American market from direct Chinese penetration have backfired. Designed to encourage manufacturing investment, Detroit’s Big Three —General Motors, Ford, and Jeep-maker Stellantis — have announced more than $50 billion in combined write-downs.
The result is a paradox: protectionism has succeeded in keeping Chinese EVs out, but failed to make American car companies competitive. American consumers bear the cost. The average price of a new car in the US exceeded $50,000 last year, according to Kelley Blue Book. More than one in four new vehicle owners owes more on their cars than they are worth and carries more than $10,000 in debt, according to the online automotive marketplace Edmunds.
Across the Atlantic, Europe is moving in the opposite direction. After initially leaning into trade defense by levying significant tariffs on China-made EVs, Brussels is replacing them with voluntary “price undertakings.” Under these arrangements (which are negotiated on a case-by-case basis), Chinese automakers agree to minimum import prices and volume caps in exchange for tariff relief.
Canada’s approach mirrors European pragmatism rather than US protectionism. In early 2026, Ottawa canceled its 2035 EV sales mandate, stepping back from its aggressive electrification targets.Alongside Europe, Ottawa is preparing for greater Chinese EV market access, favoring affordability and supply integration over exclusion.
Rather than racing toward full electrification, Ottawa is shifting toward emissions-based regulations that allow multiple vehicle technologies (hybrids included). This approach mirrors consumer behavior in Europe and reflects an underlying concern shared across Western economies: rapid electrification without domestic manufacturing depth risks ceding additional market share to Chinese producers.
A parallel dynamic is emerging elsewhere. India is now electrifying faster than China did at a comparable stage of development. Access to cheap solar panels, batteries, and electric vehicles —technologies whose costs were driven down by Chinese scale — has allowed India to leapfrog earlier fossil-intensive growth paths.
These turns reflect a recognition that tariffs alone cannot halt Chinese market penetration. Chinese brands adapted to the initial European tariffs by selling plug-in hybrid vehicles — which are not subject to the same punitive tariffs — and by opting for local assembly to nullify import duties. By late 2025, Chinese carmakers registered a record 12.8% of Europe’s EV market.
Europe’s evolving strategy manages integration rather than exclusion — accepting Chinese EVs while trying to shape the terms of entry. While Europe and Canada prepare to compete in an open global market, the US approach fails to address the core competitive reality: China’s sheer manufacturing power and integrated battery ecosystem.
The US retains one competitive edge: the software and digital systems that run EVs. American companies such as Tesla, Intel, and NVIDIA lead in advanced vehicle software, including over-the-air updates and autonomous driving systems. These are increasingly valuable as cars become software-defined platforms.
But Chinese automakers are catching up, powering ahead with data-driven driver assistance, cloud connectivity, and continuous performance improvements. If the goal is global competitiveness, American industrial policy must evolve beyond mandates and walls.
Elly Rostoum is a Senior Resident Fellow with the Center for European Policy Analysis (CEPA).
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions expressed on Bandwidth are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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