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America Is at Risk of Becoming an Automotive Backwater

The United States still makes and exports millions of vehicles and invests heavily in automotive R&D. But China’s battery and materials dominance, plus uncertainty over U.S. EV demand and factory utilization, make the risk of lost competitiveness real.
Entry297 Date Time6 min MechanicCarCody Team
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The United States is not an automotive backwater today, but it is at risk of losing ground where the industry is changing fastest. The country still produces millions of vehicles, exports parts and cars, and invests heavily in automotive research. The sharper warning is that China has built a commanding position in electric-vehicle batteries and materials, while projected U.S. electric-car demand may not keep pace with planned domestic capacity. Whether that becomes lasting decline depends on production, supply-chain resilience, exports and the ability to turn investment into competitive products.

What would make the United States an automotive backwater?

“Backwater” is best treated as a warning about relative competitiveness, not as a description of the present U.S. industry. A country can have a large vehicle market and still lose influence over the technologies, components and production practices shaping the next generation of cars.

The test is therefore broader than whether U.S. factories remain open. It includes the country’s share of global vehicle output, its ability to build and source electric-vehicle batteries and materials, the productivity and innovation of its manufacturers, and whether domestic demand supports efficient use of factory capacity. Exports and trade policy matter too: they help show whether U.S.-made vehicles and components can compete beyond the home market and how rules affect costs.

The evidence points to a real competitive risk, especially in the electric-vehicle supply chain, but not to an inevitable outcome. The figures below come from different years and use different measures, so they should be read as indicators rather than as a single synchronized league table.

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Where the United States has lost relative ground

Vehicle production share has fallen over time

The Information Technology and Innovation Foundation (ITIF) reports that the U.S. share of global vehicle production fell from 46% in 1965 to 14.7% in 2022. ITIF also reports that the Big Three—General Motors, Ford and Stellantis’ predecessor Chrysler—went from 92% of the U.S. market in 1965 to 38% in 2024. These are different measures: the first is a share of global production, the second a share of the domestic market. Together, they describe a long loss of relative position, not the disappearance of the U.S. industry.

ITIF argues that slower adoption of improved production practices contributed to that decline. That is the organization’s interpretation, not a settled single-cause explanation. Its figures also show a cumulative U.S. passenger-vehicle trade deficit of $425 billion from 1963 through 2023. A long-running deficit is relevant to competitiveness, but by itself it does not establish what will happen next.

China has scaled the electric-car supply chain

The International Energy Agency (IEA) reports that in 2025 China accounted for 70% of electric-car production, more than 80% of battery-cell production, about 85% of cathode active material, and more than 90% of anode active material used in electric-car batteries. This concentration extends across materials and manufacturing, rather than resting on vehicle assembly alone.

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The IEA’s 2035 stated-policies scenario still has China supplying nearly 90% of anode active material, about three-quarters of cathode active material and two-thirds of batteries. Those are projections under the policies and assumptions in that scenario—not guarantees. Still, they indicate how difficult it could be for other regions to reduce reliance on Chinese supply across several linked stages at once.

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U.S. battery capacity faces a demand-and-sourcing test

Planned capacity may outpace domestic demand

In the IEA’s stated-policies scenario, U.S. electric-car demand exceeds 10% of new-car sales by 2030. The same scenario projects more than 3.5 million units of dedicated U.S. electric-car manufacturing capacity by then, alongside nearly 8 million units of flexible capacity able to make internal-combustion or electric vehicles. The IEA says this pipeline could meet domestic demand through 2035 in that scenario.

That apparent ability to cover demand is not the same as a guarantee that factories will run efficiently or profitably. The IEA says lower projected U.S. EV demand weakens battery-plant utilization and that battery capacity committed by 2030 could be nearly twice projected U.S. battery demand in 2035. “Committed” capacity is a pipeline measure; it should not be mistaken for capacity already built, operating or producing at full rate.

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More vehicle production will not by itself solve materials dependence

The IEA projects that domestic U.S. production in 2035 will meet about half of cathode active-material demand and about one-quarter of anode active-material demand in its stated-policies scenario. That leaves exposure to imports even if U.S. assembly and battery-cell capacity expand. The strategic question is not simply how many vehicles or cells are made in the country, but how much of the upstream chain can supply them reliably and competitively.

The U.S. industry still has substantial strengths

A large market, manufacturing base and export business

SelectUSA, an initiative of the U.S. Department of Commerce, reports that the United States was the world’s second-largest market for vehicle production and sales in 2024. It produced 10.6 million motor vehicles and recorded sales of 16.3 million. SelectUSA also reports that the U.S. automotive cluster employs more than one million people and includes a major presence of foreign-owned automakers.

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In 2024, U.S. exports exceeded $87 billion in motor vehicles and $85 billion in automotive parts, according to SelectUSA. Those exports show an established role in international trade, even as ITIF’s longer historical series records a cumulative passenger-vehicle trade deficit. The figures cover different categories and periods, so the export totals do not cancel out or contradict the historical deficit.

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Research and automation remain assets

SelectUSA reports nearly $33 billion in U.S. automotive research and development investment in 2023. It also says the automotive industry accounted for about 40% of industrial robot installations in 2024. These figures indicate continuing investment and industrial capability; they do not, by themselves, establish that U.S. firms are converting those assets into faster innovation or lower-cost production than competitors.

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Trade rules and security policy shape the transition

USMCA rules create gains and costs within the industry

The U.S. International Trade Commission’s July 2025 report on the USMCA automotive rules of origin describes concentrated effects in the automotive industry and negligible effects on the U.S. economy overall. Its model estimated gains for U.S. parts and materials producers, slight declines for U.S. light-vehicle producers, and a slight increase in average light-vehicle prices. These are modeled effects of the rules, not a claim that every producer or buyer experiences the same result.

The Commission reports that U.S. automotive manufacturing investment rose from $27.9 billion in 2019 to $87.8 billion in 2023, then fell to $34.1 billion in 2024. It cautions that the rules of origin account for only part of that change and that other factors had greater impacts on the industry. The figures therefore should not be used as a simple verdict that the rules caused the investment surge or subsequent decline.

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Connected-vehicle restrictions address security, not industrial leadership

The U.S. Department of Commerce’s Bureau of Industry and Security has adopted restrictions concerning specified connected-vehicle hardware and software links to China or Russia. Software-related prohibitions begin with Model Year 2027; hardware restrictions begin with Model Year 2030, or January 1, 2029, for units without a model year. This is a supply-chain security intervention. Its existence does not demonstrate that U.S. manufacturers lead in connected-vehicle technology, nor does it settle the broader competitiveness question.

What would show that the risk is materializing?

The most useful evidence will be a trend across several measures, not a single headline number. Watch whether the United States can:

  • Stabilize or increase its share of global vehicle production, rather than relying only on the scale of its domestic market.
  • Expand exports of vehicles and parts while improving its position in passenger-vehicle trade over time.
  • Increase domestic production and diversified sourcing of cathode and anode materials, reducing vulnerability to concentrated imports.
  • Match battery and vehicle factory output to actual demand, with sustained plant utilization rather than large announced or committed capacity alone.
  • Translate research, automation and investment into competitive products and manufacturing processes as the market shifts toward electric vehicles.

If U.S. output, exports and industrial capabilities remain strong while sourcing becomes more resilient and planned capacity is matched to demand, the “backwater” warning will have overstated the outcome. If production share keeps falling, battery-material dependence persists and factories struggle to find buyers, the risk will be harder to dismiss. On the evidence available, the United States has substantial assets—but retaining its place in the industry will require turning them into competitive performance in the technologies and supply chains that matter next.

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