This month, Volkswagen, once the proudest symbol of German industrial strength, said it would cut its model lineup by as much as half and, if unions agree, shed up to 100,000 jobs. Days later came a more startling report: XPeng, a Chinese electric vehicle startup barely a decade old, is in talks to buy one of Volkswagen’s underperforming European factories.
Read that again. The student is no longer merely outselling the teacher. The student is bidding on the teacher’s classroom.
In Washington and Detroit, the reflexive answer is protection. Tariffs on foreign cars and an effective ban on Chinese EVs will, the thinking goes, give General Motors and Ford the breathing room to catch up. That assumption is dangerously incomplete.
Tariffs buy time; they do not buy capability.
The durable strategy is the uncomfortable one: Invite Chinese EV makers into joint ventures on American soil, with technology transfer written into the terms, exactly as Beijing did with American and European automakers four decades ago.
Consider how fast fortunes have reversed. When GM entered China in 1997 through a joint venture with state-owned SAIC Motor, crowds lined up outside its Shanghai showroom to glimpse Buicks and Cadillacs.
Today, GM Shanghai is losing millions of dollars a quarter as Tesla, BYD and Geely muscle out its tried-and-true models. SAIC-GM is racing to electrify before the partnership expires. But the backdrop is brutal: Buick, once GM’s crown jewel in China, saw sales collapse by roughly 75% from their peak.
Volkswagen’s fall is steeper because its bet was bigger. The company arrived in Shanghai in 1984 and led the Chinese market for forty years. At its height, China delivered half or more of Volkswagen’s global profits, underwriting generous wages back in Germany. Then came the EV transition. VW’s China sales last year were down by a third from 2019, and sales from April through June fell by another third from a year earlier.
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