Morgan Stanley analysts say Chinese automakers are expected to expand further into the United States in the next decade — even with the tariffs in place between the world’s two largest economies.
In a new note published on Tuesday, the analysts noted that 1% of the US market today is already represented by Chinese vehicles, stating that they “don’t think that’s a high bar” when it comes to growth in the following five to ten years.
Despite no Chinese automaker being directly present in the market, several vehicles sold in the US are built in the country — it is the case for most vehicles sold by Volvo and Polestar — both brands under China’s Geely Holding Group.
Another example is the Buick Envision, a five-seat SUV manufactured exclusively in China by the SAIC–GM joint venture.
The model is supplied to both the Chinese and North American markets.
The firm noted that “local manufacturing can spool up faster than distribution” for Chinese automakers, as structural challenges remain.
The brands may have to choose between local dealership agreements or partnerships with Western legacy automakers.
According to Morgan Stanley, joint ventures or cooperative agreements are “the best way forward” in the US.
The analysts further added that they are “not aware of a single automotive CEO or CFO who believes that US tariffs will be successful in keeping China product out of US showrooms permanently.”
“When Ford CEO Jim Farley praises a competitor’s car (Xiaomi SU7) — saying he aims to make one just as good or better in a few year… you’ve likely got a winner on your hands,” the analysts commented.
Farley was on the Everything Electric Show late last year, where he commented on the Xiaomi SU7, adding that he “flew one from Shanghai to Chicago, and I’ve been driving it for six months now and I don’t want to give it up.”
Despite regulatory and tariff barriers, Chinese automakers are likely to expand in the US at a slow but steady pace, similar to what has happened in Europe.
Morgan Stanley noted that China’s share of the EU new energy vehicle (NEV) market — which includes both electric vehicles and hybrid models — has climbed rapidly to 12%.
According to data released by the end of the second quarter by Jato Dynamics, and despite a slight decline in the overall automotive market, Chinese automakers achieved a record share of 5.7% in European vehicle registrations in June across all powertrains.
