Western auto bosses: Industry locked in ‘Darwinian’ battle with China

• Mercedes-Benz CEO Ola Källenius says carmakers need to bend over backwards if they want to beat the Chinese.
• Källenius described the competition between car manufacturers as a “Darwinian-like price war”.
• Meanwhile, Ford’s CEO called China’s auto industry an “existential threat” after a visit to the country in May.

The Western auto industry is now locked in a pivotal existential battle with Chinese competitors, if recent remarks by the chief executives of Mercedes-Benz and Ford are anything to go by.

Mercedes-Benz CEO Ola Källenius was speaking at a Berlin Global Dialogue conference on October 2 when asked about the threat posed by Chinese electric vehicle manufacturers.

EVs, Källenius said, are cheaper for Chinese consumers to buy than combustion vehicles, even though they cost more to produce.

“It’s strange. It’s a Darwinian price war, the purification of the market. And a lot of these players that are now. A lot of these won’t be around five years from now,” he said.

“In that market consolidation phase, you have a cash burn and value destruction that affects even the companies that are at the top of the pyramid because you can’t get out of the market,” he added.

But automakers, Källenius added, should not remain “paralyzed” in the face of all this market turmoil.

“You have to hold your nerve, keep investing, keep innovating and make sure that at the end of that Darwinian battle, you’re one of the remaining combatants, and that’s what we’re focused on,” Källenius said.

Representatives for Källenius at Mercedes-Benz did not immediately respond to a request for comment from Business Insider sent outside regular business hours.

Mercedes-Benz’s CEO isn’t the only major auto boss sounding the alarm about their Chinese competitors.

After a visit to China in May, Ford CEO Jim Farley told a board member that he sees the Chinese auto industry as an “existential threat,” according to a Sept. 14 report by The Wall Street Journal.

Farley wasn’t the only top Ford executive with an eye on the aggressive progress of the Chinese market.

In early 2023, Farley and CFO John Lawler were in China testing an electric SUV made by Changan Automobile, a state-owned automaker.

The quick test drive, with Farley driving and Lawler riding shotgun, left them both shocked and impressed by the quality of the Chinese-made electric vehicles, the Journal reported.

“Jim, it’s nothing like it used to be,” Lawler told Farley after the test. “These guys are ahead of us.”

When it comes to competing in the EV market, Western automakers have been left playing catch-up with the Chinese.

Chinese automakers like BYD have expanded into Southeast Asian countries like Thailand, as well as developing markets like Brazil and Mexico.

According to data compiled by technology firm ABI Research for BI, Chinese automakers accounted for 70 percent of the electric vehicle market in Thailand and 88 percent in Brazil in the first quarter of this year.

The seemingly unstoppable growth of Chinese automakers has prompted Western governments to step in in the form of tariffs.

In May, the US government imposed tariffs on Chinese automakers. Crippling trade restrictions have effectively shut them out of the US auto market. The European Union also introduced tariffs just a month later.

In particular, Mercedes-Benz’s Källenius is not a fan of using trade restrictions to stifle competition.

“Don’t raise tariffs. I’m a contrarian, I think you go the other way: take the tariffs we have and lower them,” he told the Financial Times in an interview published in March.

“This is the market economy. Let the competition take place,” he added.