The Mobility Squeeze: How Western Markets’ Vulnerabilities are Becoming Opportunities for the East
Automakers in the Western half of the world face a serious, unexpected dilemma. On the one hand, the supply chains are withering away under geopolitical pressures, and on the other hand, a new competitor from the East is taking over markets in two major continents.
The supply chain shock that came along with the pandemic was expected to be temporary. However, it lasted much longer than its welcome. Semiconductor shortages, Red Sea disruptions, and logistics collapse due to the pandemic led to the global loss of 7.7 million vehicles produced in 2021. It highlighted the structural fragility in Western automotive value chains that couldn’t be fully addressed.
Our recent analysis on cross-industry supply chain resilience showed that the mobility segment bore the brunt of these disruptions. Years and years of lean, geographically isolated, and just-in-time supply chain structure left it vulnerable to global fluctuations and supply shifts.
The Emerging 2-Front War
While the European and American OEMs were trying to repair the damage, the Chinese manufacturers were creating a new wave of next-gen EVs that took over the Western hemisphere unapologetically. In Europe alone, Chinese BEV exports grew by 19x from 2020 to 2024.
While Europe tried to slow down this growth rate with countervailing duties, it failed to slow down the dragon. Instead of backing down, Chinese OEMs localized and started expanding their market in Europe as well as Latin America. In Latin America, they took over faster than in Europe. The highlights of this rapid expansion were:
- BYD established a new manufacturing base in Hungary
- Chery signed new manufacturing agreements in Spain.
- Currently, BYD holds over 30% of the Brazilian EV market as it took over a former Ford facility and turned it into an EV production unit.
- In Chile, 47% of EV sales belong to Chinese brands, and Mexico is home to Chery’s vehicle assembly facility. The position will be highly fruitful if the US market ever opens up.
Invariably, tariffs became the driver of deeper entrenchment. But that’s not all, while regulatory developments are attempting to slow down the dragon, there is no respite to the growing reliance on China-based semiconductors and software stack for batteries and SDVs. The stories of these two continents aren’t parallel, but they reflect the same strategy: exploit the 25-35% cost-per-vehicle benefit rooted in vertically integrated batteries, native software architecture, and LFP chemistries. Use these drivers to advance on the most vulnerable fronts of Western OEMs.
Bottomline
The supply chain crisis was the initial domino of this chain. Chinese OEMs turned this chaos into a stepping stone to build multi-functional capability that didn’t just open one door but many others simultaneously. The entire Western Hemisphere is a single strategic theatre despite the operational differences. Eventually, organizations that treat regional challenges separately will be left behind perpetually. The window to deliberate repositioning on supply chain, R&D, and partnership frameworks is still open, but it won’t stay open indefinitely.
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