Are Chinese Auto Makers A Buy?
The average price of a new car in the U.S. is now around $49,000—up 34% in just five years. We haven’t seen a spike like this since the 1970s, when fuel efficiency mandates and economic stagflation rocked the auto industry. That era hit close to home for me—my 1975 Corvette (which I’m still working on) is a classic example of how American automakers struggled to adapt. It’s a beauty, but that big 5.7-liter V8 barely puts out 180 horsepower and guzzles gas like there’s no tomorrow.
Back then, U.S. carmakers tried to buy time by tweaking old engines instead of innovating quickly. Meanwhile, Japan stepped in with the Honda Civic, a tiny 50-horsepower car that got nearly 50 MPG. While GM, Ford, and Chrysler still dominated in 1972, by 1975 Japanese manufacturers had nearly quadrupled their U.S. market share. That year marked a bottom for American auto sales, with massive layoffs and huge revenue drops.
The Big Three did bounce back briefly, but another crash came in the late ‘70s and early ‘80s. And while history doesn’t repeat exactly, I’m seeing some familiar signs.
For one, vehicle manufacturing jobs are at a 34-year high—but part of that’s because Chinese automakers are being kept out of the U.S. market. Frankly, they’re doing it better and cheaper. Just look at BYD: they sold over 4 million vehicles last year, making them the biggest EV/hybrid maker and the 6th largest automaker by volume globally. Their revenue soared to $107 billion, and their cheapest model sells for just $10,000. All their cars come with a free “Eye of God” driver assist system, a prelude to full autonomy.
BYD’s CEO wants to expand globally, and I don’t blame him. China’s government subsidies helped, but so have U.S. and European policies for their own auto industries. In 2020, China exported 1 million cars—by 2024, that number hit 4.3 million. And they’re expected to capture 13% of the global market within five years.
We’re seeing big shifts everywhere. Ford ditched its Brazil factory (BYD’s buying it), Chinese EVs now dominate in Thailand, and Japanese automakers like Subaru and Suzuki are pulling out. Stellantis even blamed a 30% sales drop in Asia-Pacific on Chinese competitors.
It’s starting to feel like the global auto sector is China’s oyster.
So… is it time to invest in Chinese automakers? Most U.S. investors shy away from them, but that might actually make them smart contrarian plays.
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