McKinsey auto leader: China’s auto industry is faster, cheaper and better. Here’s how the West can close the gap 

Dr. Philipp Kampshoff is a McKinsey senior partner and global coleader of its Automotive and Assembly practice. He also cofounded the McKinsey Center for Future Mobility.  

When Covid ended and the blanket lifted, Western auto executives got the shock of their careers. China hadn’t just kept pace — it had made a quantum leap. Now, sales are slowing, tariff costs are biting, and war is pushing gas prices higher. Any one of these business headwinds would be enough to cause concern. But the thing that is really keeping executives up at night is China. 

The Detroit 3 have lost 16 points in global market share over the last 20 years — almost a point a year. At the same time, Chinese car companies have gone from less than 1% to 12% global market share. Western automakers used to generate substantial profits in China; those profits are disappearing as Chinese manufacturers take over their home market and aggressively expand everywhere else. China’s automakers are advancing across Europe, Southeast Asia, and Latin America. The U.S. remains the last significant market keeping Chinese models out — and trade barriers won’t hold forever. 

The scale of China’s advance is visible on the ground. BYD now operates around 200 sales outlets in Germany alone. This is not a distant threat. It is already reshaping markets Western automakers once considered protected home turf. 

The pressure is now hitting American showrooms directly. McKinsey’s just-released Mobility Consumer Pulse survey finds that as tariff-driven price increases take hold, U.S. buyers are trading down on their next purchase or holding onto current vehicles longer. That’s a demand signal Western automakers cannot afford to misread — particularly as more affordable competition is still at least a year away from market. 

Over several decades, Chinese automakers learned........

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