Great product. Attractive price. That's the pitch dealers worldwide are hearing from Chinese automakers right now, and Michael Dunne says it's not wrong. It's just incomplete.
Dunne has spent years watching China's domestic auto market up close, and he's seeing dealers in markets like Kazakhstan and Russia already courting BYD, Geely, Leapmotor, and Xpeng. His warning isn't about the product. It's about what happens after the honeymoon.
Worth Considering
There's a saying in China: when Chinese enter an industry, profits are the first to hit the exits.
Inside China's own domestic market, Dunne says that's already played out. Dealers, suppliers, and manufacturers alike are struggling to turn a profit. Chinese automakers have shown a willingness to sustain little or no margin for extended periods, a strategy that works when the goal is market share, not necessarily when the goal is a dealer's long-term enterprise value.
The Question Every Dealer Should Be Asking
If my enterprise value today is a billion dollars, will it be half a billion five years from now? That's the risk. When you engage with the Chinese, understand what kind of tango you're getting into. Terrific product, but what happens to margins?
That's not a rhetorical question. It's the actual due diligence Dunne is recommending: not "is this a good car at a good price," but "what does this partnership do to my business if the same margin compression that happened inside China happens here too."
🎙️ Listen to today's Automotive State of the Union episode for the complete discussion.
A great product at a great price is only half the deal. The other half is what it costs you five years from now.
Dealers already in these conversations aren't wrong to be excited about the product. Dunne's point is narrower and sharper than "be cautious": know exactly what pattern you're stepping into before you step into it, because the pattern already has a track record, and it isn't a profitable one for the dealers who got there first.
