The U.S. auto industry faces a growing competitive threat from China’s EV sector, where structural efficiencies yield 38% cost advantages. Panellists at The Merge 2025 urged bipartisan policy consistency, warning that America’s lurching regulatory swings waste billions and cede strategic ground.
At a recent Alliance for Automotive Innovation conference, auto industry executives and policy experts laid bare an uncomfortable truth: America’s stop-and-start approach to EVs is handing China an ever-widening lead in the technology that will define the next generation of transportation and national defence
The United States auto industry contributes roughly five percent of GDP and supports millions of jobs, but its future hinges on a question that has become deeply polarized: what role should EVs play in America’s industrial strategy? Last December, at The Merge 2025 conference in Washington, D.C., a panel of industry leaders argued that regardless of where one stands on EVs, the country’s lurching policy environment is doing real damage – and China is capitalizing on every moment of indecision.
According to Colin Langan, director and senior equity analyst at Wells Fargo Securities, the competitive picture is stark. He pointed to research from engineering firm A2Mac1 comparing Chinese EV manufacturers to legacy automakers, calling the findings “absolutely staggering.” There is “a 38% cost difference,” he said. “This is an industry where margins are like 7% for automakers.”
That gap is not simply a product of cheap labour or government handouts. According to Langan, “labour is like 5% of that gap” and raw materials account for “another 5%.” The rest comes from structural and organizational advantages. Chinese automakers are much more efficient, he said. “They’re leaner organizational structures. They don’t advertise as much, and they’re much faster at moving.” Langan noted that, “R&D as a percent of sales is half in China of what it is in legacy companies and yet the products come out every two to three years as opposed to four to five years. So, while a traditional automaker is launching their first product, the Chinese automaker is launching the second version of that product which has already been refined.”
Consistency is key
The implications for the EV race are profound. According to Michael Dunne, chief executive officer at Dunne Insights, China’s commitment to electrification stretches back a quarter century. “I witnessed it as far back as 2000,” he said. “Even then China was writing white papers on the importance of moving strategically as a nation to EVs,” he said. He acknowledged that in the early years there was considerable “waste, fraud, wheel spin, failure,” but added that China’s approach proved “effective over time by sticking with the policy. That’s very hard for us as Americans to get our heads around, but that’s what we saw.”
This consistency stands in sharp contrast to the American approach. According to Langan, “the swings in policies make it virtually impossible for [U.S.] companies.” He explained that “it takes probably three to five years to really make auto plans,” and observed that “the prior regulatory regime was like insanely aggressive. I don’t think the EV technology is anywhere close to the targets. But based on current policy it now looks like we’re going to swing to the other side and pretty much go without EVs. Which is maybe a little too far the other way.”
The financial toll of this whiplash is already measurable. “GM took just a $2 billion EV impairment a couple weeks ago,” said According to Langan. “The suppliers have wasted tons of money on tools for plants geared up for hundreds of thousands of units, when they’re only making hundreds.”
Unhealthy competition
According to Jeff Walker, chair of SAE-GLC 2025 and chief commercial officer at SDVerse, the broader auto industry operates on thin margins that make policy uncertainty especially punishing. “The automotive industry is a single-digit EBIT (earnings before interest and taxes),” he said. “So, it’s not making money hand over fist like an Apple phone company. Which is why people aren’t investing.” When companies must dual-source components for resilience, “it’s very expensive, capital intensive and very hard to do,” said Walker. “You got to double your testing and bring on two new suppliers.”
Walker was emphatic that the industry needs far more than trade agreements or tariffs. “USMCA is not policy. Neither are tariffs policy,” he said. “What the broad auto industry needs is policy, a comprehensive understanding. Do we want this industry or not? It will go away if we don’t take care of it. And that’s happening in Europe right now.”
The panellists described a Chinese ecosystem that breeds fierce competition even among domestic players. According to Langan, “the only people they’re tougher on than foreign companies is themselves. The Chinese just beat each other’ brains out happily.” He recounted meeting the chairman of Chinese automaker SAIC Motors who told him, “We’re taking BYD down. Mark my words.”
According to Dunne, China’s competitive edge is less about original genius and more about execution. “China’s secret superpower is less about original thinking and more about the ability to sense a commercial opportunity and move as quick as lightning to capitalize on that and then scale,” he said. “Think of Chinese innovation as the ability to commercialize and scale quickly on technology that often originates somewhere else.”
Great wall of China
According to Will Garrity Binger, senior economic policy advisor to Senator Jeanne Shaheen, China’s industrial policy operates across every level of government. “You see fiscal support in cheaper financing, wage subsidies, provided to manufacturers and R&D support from the government,” he said. He also pointed to “restrictions on market access and licensing requirements, which mean if you want to sell to or produce in China you have to set up a joint venture.”
Binger noted that China’s long-time horizons give it a distinct advantage. “They’ll pick something that is a target for 15 years and there will be support for it through that time,” he said. He cited consumer electronics, software, and EV OEM Xiaomi as an example of the system’s dynamism: “Xiaomi was not a car company five years ago,” said Binger, “But it has actually become quite successful at it.”
Yet when it comes to American trade policy responses, Binger expressed scepticism. He pointed to recent ISM manufacturing data showing a ninth straight month of contraction. “If the tariff policy has been an attempt to revive domestic manufacturing, I’m not sure it’s working very well.”
Independence Day
The panellists converged on batteries as perhaps the single most important strategic priority connecting EVs to broader national security. According to Dunne, the conversation must transcend the EV debate entirely. “Separate whatever you feel about EVs,” he said, “We need batteries to power our next generation of defence weapons. Drones, humanoid robots, surveillance systems – batteries are going to pop. What about all that upstream and mid-stream stuff that we are totally relying on China for? That would be a priority in my mind.”
According to Langan, when asked what the single most important step would be, the answer begins with political consensus. “There needs to be sort of a mutual agreement between Democrats and Republicans of where EV policy goes,” he said. “Something that’s far more balanced than what was before, but more balanced than what is now, where there’s actual penalties that are enforceable.” He added that companies should pursue leaner, faster innovation regardless of the China threat: “The Chinese are actually adding more technology and putting out better products, so there’s no harm in us doing that here too.”
According to Binger, it comes down to creating the right conditions. “The U.S. government is not going to create an industry, but it can create the conditions for an industry to succeed,” he said.
According to Walker, auto policy is the answer. “A comprehensive one that takes both views from Republicans and Democrats and thinks about this industry as something cherished for our country.”
The message from the panel was unanimous: America does not lack the talent, capital, or market to compete in the EV era. What it lacks is the one thing China has maintained for more than two decades – a steady hand on the wheel.
