Fresh off my panel at last week’s Automotive News Congress in Detroit, I wanted to capture a few thoughts while the discussion is still fresh in my mind.

The panel was titled “China’s Growing Influence on the Global Auto Industry.”

The Chinese have a term they call “Involution.”

Involution describes a kind of hyper-competitive, zero-sum rivalry in which companies relentlessly undercut one another on price, compress margins, and race to out-innovate competitors.

We’ve seen this playbook before in Chinese consumer electronics.

Now it is being applied to the automotive industry.

(Click here to continue reading)

Until next week,

Steve Greenfield
General Partner
Automotive Ventures

The Trump administration finalized a significant weakening of federal fuel economy standards for automobiles, rolling back a key policy that had pushed the industry to improve the efficiency of cars and trucks and sell more battery-electric vehicles. Automakers must achieve a fleet average of 34.9 mpg for cars and light trucks in model-year 2031, the U.S. Department of Transportation said on Monday. That’s far less than the roughly 50 required by standards finalized under President Joe Biden. The move advances President Donald Trump’s effort to unwind federal policies that had pushed the auto industry to improve the efficiency of their gasoline-powered cars and trucks and sell electric vehicles in greater numbers. Trump has repeatedly attacked those measures as an “EV mandate” that drove up new-car prices, calling the policies “ridiculously burdensome.” | Automotive News ($)

General Motors will see its technology costs decline by $20.4 billion through 2031 as a result ​of drastically lower vehicle fuel economy rules finalized Monday, the ‌U.S. Department of Transportation said. In total, the Trump administration estimates automakers’ technology costs will decline by $60.6 billion through 2031, or about $1,289 per vehicle, as a result. The 2024 fuel ​economy rules had been estimated to cost GM $31.7 billion through 2031. The ​new rule is expected to take effect around early December. Automakers ⁠will not need to add expensive emissions equipment to reduce fuel consumption ​or build more EVs, as they would have had to under the prior ​rule in order to meet more stringent requirements. The department's National Highway Traffic Safety Administration (NHTSA) said Chrysler-parent Stellantis's costs will decline by $6.6 billion, Ford by $5.8 billion, Toyota by $4.5 billion and Honda ​by $4.1 billion. GM said it supports the goals of the rule and its intention ​to better align fuel economy standards with market realities. | Reuters ($)

American car buyers are rediscovering smaller vehicles. General Motors posted a big rise in sales of its small SUVs in the third quarter, including the Chevrolet Trax and Trailblazer. Sales of the Hyundai Elantra sedan jumped 18%. Toyota Motor Corporation’s small Corolla is sharply up this year. All carry sticker prices starting below $25,000. Meanwhile, sales of some big SUVs struggled. GM recorded declines in hulking SUVs like the Chevrolet Suburban and Tahoe. Hyundai’s three-row Palisade SUV dropped 1% in the third quarter. Jeep’s Grand Cherokee declined by 30%. “Thank God we never gave up on passenger cars because that’s helping us gain a little bit of share in the marketplace,” said Randy Parker, chief executive of Hyundai Motor America, at an Automotive News event in Detroit on Wednesday. | The Wall Street Journal ($)

BMW, AUDI and other European carmakers are trying to revive their sales with a new generation of supersized luxury SUVs in America. European automakers are hungry for growth after a sales collapse in China triggered by falling home prices and digitally savvy local competitors. China used to account for as much as half of profit for companies such as BMW, Mercedes-Benz and Audi owner Volkswagen. The business case for launching larger SUVs in the U.S. has grown even stronger after President Trump eased emissions standards. Under new rules, automakers no longer need to sell as many fuel-efficient cars to compensate for big SUVs, which typically come with big, gas-guzzling engines. As profit from China has dried up, the U.S. has taken on outsize importance. Big SUVs are a particularly attractive niche to grow into because they carry higher margins. "Typically in the auto industry, the bigger the vehicle, the bigger the profits,” said Tyson Jominy, a senior vice president at data provider JD Power. | The Wall Street Journal ($)

A few years ago, a Virginian and a New Yorker set out to buy cars, both with credit scores below 570. That’s low enough to reflect histories of financial strain, but not so low that two of America’s biggest subprime auto lenders — Exeter Finance and Banco Santander — wouldn’t bankroll them. When the borrowers started missing payments, one was quickly routed to repossession. The other began a cycle of loan modifications, racking up thousands more in interest charges but keeping their car — for a while, anyway. Meanwhile, their loans, bundled with thousands of other debts, were fed into the Wall Street money-spinner known as asset-backed securitization, or ABS, throwing off regular payments for bondholders and freeing up the lender’s balance sheet to originate more loans. Ultimately, both borrowers lost their cars, another hit to their already poor credit. What’s more, neither borrower made a dent in their debt. They’d paid thousands of dollars toward the loans, but almost all of it went toward interest. Each ended the journey worse off than they started: with no car and a new blight on their financial record. Both lenders managed to satisfy investors despite their customers’ struggles. How they do it reveals the mounting pressures on American car buyers and the relentlessness of the $104 billion market for securitized subprime auto debt. Even as the borrowers bought and lost cars they ultimately couldn’t afford, the interest and fees on these types of loans are high enough to make money for lenders and their investors despite rising defaults. | Bloomberg ($)

Something’s missing from the nation’s auto showrooms: new cars. Fresh models attract car buyers to showrooms and command higher prices. Without them, dealers are left pushing aging designs while automakers race to churn out new models—meanwhile using retro throwbacks, special editions and six-figure status symbols to keep buyers coming. Fewer new models are hitting the market than at any time in recent history. Automakers are expected to redesign 9% of their lineup on average across the 2026 through 2028 model years—well below the 20-year average of 14%, according to a report by veteran automotive analyst John Murphy. That figure, which factors in sales volumes, would be even lower if not for General Motors’ redesign of its top-selling pickup trucks. The dearth of new models is a direct hangover from the industry’s shift to electric vehicles and its abrupt pullback. The billions bet on EVs diverted time and money from the types of models that buyers crave today, from hybrids to V8-powered trucks. New entries are sparser now than in the years following the Covid pandemic, when the auto industry ground to a halt, and in the aftermath of the auto industry crisis of the 2007-09 recession. It will be at least another year or two before car companies start churning out new models at their usual pace, analysts say. | The Wall Street Journal ($)

Western automakers are chasing a defence spending boom as a way to sell more vehicles and make use of underemployed factories, though executives say military work will not make up ​for slowing car sales and growing Chinese competition. Automakers including Ford Motor Company, General Motors and JLR are bidding for military contracts using modified versions of pickup trucks and off-road ‌vehicles they already produce, while others are selling underused plants to defence manufacturers expanding capacity. The industry is tapping into rising Western defence spending, but executives and analysts told Reuters the opportunities to materially boost revenue remain limited. | Reuters ($)

For about a decade, cars all over the world have had high-tech smart headlights that can steer light away from oncoming traffic while surgically illuminating the pavement further down the road. They’re better for you, the driver, and they’re better for the drivers in front of you. They have finally been approved for American roads, and carmakers are slowly incorporating them into new models. Even with the approval of these adaptive driving beam headlights, or A.D.B.s., it will take years before enough vehicles are equipped with the tech to make a significant difference. But at least there’s light at the end of the tunnel. They can only help. According to Federal Highway Administration data, half of all traffic fatalities happen after dark, but only one-quarter of driving happens at night. | The New York Times ($)

Tesla was just granted a patent for an “Electric Fan Car,” a system that uses four electric ducted fans in the rear diffuser to suck the car down to the road at any speed. The car in the drawings is a Model S, which Tesla stopped building in April. It’s Tesla’s second fan car patent in just over a year, and it arrives two weeks before the company’s latest attempt at a Roadster demo. The idea is simple. An inlet on the underbody, between the rear wheels, feeds a duct that sweeps up to a wide outlet in the rear diffuser. Four axial fans sit side by side in that outlet, split by three vertical strakes. When they spin up, they evacuate the air under the floor and exhaust it through the rear. That creates what Tesla calls a “suction region” under the floor. A vacuum. The rear end also gets a raked plate that acts as a second diffuser. Tesla’s pitch is about speed independence. The filing notes that passive diffusers limit downforce at low speed and “often results in an excessive load at a high speed.” The fans, according to Tesla, “can produce a downforce independent of the vehicle velocity,” which helps with braking stability and cornering speed. | Electrek

There is exactly one W10-powered BMW M5 in the world, built for former Volkswagen chairman Ferdinand Piëch. It’s heading to auction in Belgium next month, and projected to sell for up to $400,000. | BMW Blog

In the dozen years since Mary Barra became chief executive of General Motors, many of the U.S. auto industry's certainties about the future have evaporated. Her first job as CEO in 2014 was to remake the century-old company's corporate culture and regain customers' trust following a tragic, reputation-wrecking ignition-switch crisis. Barra has since navigated a global pandemic, tariffs and supply-chain chaos, and the rise of AI as an unstoppable and industry-shaking force. Meanwhile, China's nascence as an electric-vehicle superpower and a whiplash shift in Washington's approach to EVs have created a sobering reality for every legacy carmaker: The American electric revolution that until recently appeared imminent is proceeding far more slowly than many in Detroit and Washington expected. A few years ago, automakers were preparing for an environment in which 40% to 50% of their vehicles would need to be electric by 2030. But then the Trump administration unwound key incentives and rules that had encouraged EV adoption, and the regulatory ground shifted beneath their feet. Consumer habits also proved more stubbornly set than PowerPoint presentations had suggested. "I don't think it's shifted our mission," Barra says. "We still think EVs are the endgame." | Fortune ($)

Steve Greenfield, general partner at Automotive Ventures, said the Australian market, where Chinese cars have made rapid inroads, offers a sneak peek at what dealers can expect. Affordable Chinese cars are popular with consumers there, boosting China-brand market share in Australia from 3 to 30 percent in just three years, he said. But in that period, the valuations of Toyota dealerships dropped from six times earnings to three times, he said. “The dealers are reeling,” Greenfield said. “If I’m a standalone rooftop and I’m selling Toyotas, I’m losing market share dramatically, and my profit margins are evaporating.” | Automotive News ($)

The two senators backing a permanent legislative ban on Chinese vehicles in the U.S. will not seek approval until the Senate returns from recess in November, congressional aides said Sept. 30. Republican Sen. Bernie Moreno said Sept. 29 that he planned to seek fast-track approval for the stringent ban on Chinese vehicles this week before the Senate left ahead of the November congressional election. But supporters were unable to address the concerns of a holdout senator, Republican Rand Paul of Kentucky, who had raised concerns it was unfairly targeting Mercedes-Benz. The bill’s other chief ​sponsor, Democratic Sen. Elissa Slotkin of Michigan, said Sept. 22 that all Democrats support moving ahead and she was hoping to get fast-track approval this week. Moreno said the final version of the bill would ensure that German automaker ​Mercedes-Benz is not banned from selling vehicles in the U.S. | Automotive News ($)

General Motors will aim to be as “lean” as possible as it braces for heightened competition in the U.S., as global carmakers flock to the lucrative market in pursuit of “a safe haven” from Chinese rivals. Paul Jacobson, chief financial officer, said the Detroit-based company would continue to focus on making its electric vehicles more affordable and profitable, while warning that U.S. climate policy could remain volatile for the next five years. The U.S. was “becoming an outlet for global automakers who are facing the pressure of China in their international markets” and “finding a safe haven in the U.S.”, Jacobson told the FT in London. “It will become more competitive.” | Financial Times ($)

Ford’s Jim Farley said it’s “too late” for Europe to fend off an influx of Chinese automakers in the region, but the U.S. still has time to “be considerate” about its decision. Farley’s comments come as Ford tries to compete against Chinese automakers in Europe, while also partnering with some Chinese companies on technology and to fill plants. | CNBC

Chinese vehicle exports to Europe are running at nearly double the rate of registrations, with logistics bottlenecks masking the true scale of shipments, investment bank UBS said. The influx will likely translate into higher registrations this year, increasing pressure on European policymakers to address the cost gap between imported Chinese electrified cars and vehicles built in Europe. UBS estimates the current pace would translate to about 20 percent annual market share for Chinese brands, compared with nearly 10 percent through August. | Automotive News ($)

Chinese automakers will start building vehicles in Mexico within three years, unleashing cutthroat price competition that will force Nissan and other legacy manufacturers to slash costs immediately or risk losing market share, Nissan Americas Chairman Christian Meunier warned. Nissan is already overhauling cost and product development to be ready for the new wave of rivals, Meunier said. “We have a very aggressive plan in Mexico, especially to get the cost down for us to be able to compete with the Chinese when they get localized,” Meunier said in a Sept. 28 briefing at Nissan Motor Co.’s global headquarters in Yokohama, Japan. “It will happen probably in the next two to three years, so we need to be ready.” | Automotive News ($)

BMW Group will significantly increase its use of generic components and reduce reliance on bespoke parts as it seeks to lower costs and improve profitability, reflecting a strategy that has helped Chinese automakers gain a competitive edge. The strategy will be a “key lever” in improving BMW’s earnings, the company told investors at its capital markets day Sept. 29-30. Generic “industry best offer” parts will account for the largest share of its annual €80 billion ($90.3 billion) purchasing budget by 2032, surpassing bespoke components, whose share will be more than halved, BMW said. The company did not disclose figures. | Automotive News ($)

The Trump administration is engaged in a multibillion-dollar, government-wide effort to loosen Beijing’s chokehold on critical minerals. It is slowly starting to work. The effort to develop a China-free supply chain for vital manufacturing inputs moved into high gear after April 2025, when China put export controls on key rare-earth elements. The U.S. push for mineral independence has spanned the departments of Defense, Energy, State, Commerce and Interior, as well as new offices and two government banks, much of it coordinated by the White House National Security Council. It represents one of the most comprehensive, sustained and focused efforts by the second Trump administration to onshore an essential U.S. supply chain, say current and former government officials and mineral experts. As China’s restrictions riled up U.S. manufacturers, the Trump administration almost immediately began pushing hundreds of millions of dollars into domestic minerals projects. | The Wall Street Journal ($)

Chinese e-truck sales jumped almost 80% in the first half from a year earlier, according to BloombergNEF, getting a boost as the US-Iran war and Ukrainian attacks on Russian refineries sent diesel prices soaring. They are on pace to account for close to a third of all rigs sold this year, up from just 8% a couple of years ago. Diesel consumption in China will drop more than 10% this year, Sinopec Economics & Development Research Institute estimates, a shift that has helped Beijing navigate this year’s oil shock and limited price rises for global markets in turn — all while cutting emissions, even if coal still plays a major role in electricity generation. The electrification of road freight is emerging as a structural force that could undermine long-term oil demand across the world. | Bloomberg ($)

Autonomous vehicle technology company Aurora told investors last week that it expects to have more than 30,000 self-driving trucks on the road generating $5 billion in annual revenue by the end of 2030 — an audacious plan considering it expects to end 2026 with just 200 driverless trucks and an $80 million revenue run rate. | TechCrunch ($)

The number of industrial robots around the world reached a record 5 million units in 2025, marking a 9% increase from the previous year, according to a recent report from the International Federation of Robotics. This was driven by an 11% increase in robot installations across factory floors — or 603,000 units added last year — underscoring strong demand as companies look to enhance productivity while navigating labor and cost pressures. Jane Heffner, president of the IFR, noted in a statement that the “strongest growth is taking place in Asia,” followed by markets in the Americas and Europe. The number of industrial robots has more than doubled over the past seven years, with a lot of the growth coming from the automotive and electronics industries, data show. | ManufacturingDive

Most software companies have their moats rooted in three pillars:

What happens as the cost of software engineering asymptotically approaches zero? Mike Vernal thinks historical moats are eroded:

What should software companies do? | Mike Vernal

Believers in the artificial-intelligence boom need to take a very close look at this number: 9% of GDP. That is how much American businesses and consumers eventually have to spend per year on the services of companies like Anthropic and OpenAI to justify the staggering sums being committed to the technology right now. Is it plausible that Americans will spend as much of their income on this one technology as they do on food? Roughly twice what the nation pays for all forms of energy or all computers and software? Seven times what consumers spend on phone, streaming, and internet services combined? You should be skeptical. Even the most transformative inventions eventually run into the law of diminishing returns: each additional dollar a user spends yields less additional productivity (or enjoyment) than the last. That imposes a natural ceiling. The question, of course, is where that ceiling is. Whether or not you think 9% of GDP is right, you have to care, because this figure isn’t some fever dream: it is implicit in the dollars that investors and companies are committing right now. | The Wall Street Journal ($)

Researchers from Northeastern University, in collaboration with Consumer Reports, published an in-depth examination of connected vehicle privacy behaviors. Utilizing nearly two dozen vehicles from CR’s test fleet, the team sought to answer critical questions: Which cars transmit data? Who receives it? Does it cross international borders? And what personally identifiable information is actually being exposed? David Choffnes, project lead and former director of Northeastern’s Cybersecurity and Privacy Institute, said the goal was to reveal the sheer scale of modern vehicle data tracking and highlight how little visibility or control owners truly have over it. “I think the conclusion is that there’s a lot to be worried about,” Choffnes said in an interview. | The Verge ($)

Our Automotive Ventures “Car of the Week”: a 1976 Lancia Kimera EVO37. | Broad Arrow

📢 A recap of Steve’s presentation at this year's Reynolds and Reynolds Amplify 2026 Conference. | Reynolds & Reynolds

The Automotive Ventures annual LP holiday gifts are on their way!

Dealerware is the only solution in the industry that manages all dealership fleets and programs on one platform with one mobile app. | Dealerware

MEMA Aftermarket Technology Conference Oct 4-6 | Dallas, TX | Speaker | LINK

AICPA Dealership Conference Oct 19-20 | Nashville, TN | Speaker | LINK

Wholesale Auto Supply Annual Meeting Nov 10 | Florham Park, NJ | Speaker | LINK

ASOTU-CON WEST Nov 18 | Los Angeles CA | Speaker | LINK

Used Car Week Nov 18 | San Diego CA | Speaker | LINK

Haig Partners Maximizing Value Conference | Feb 17 | Orlando, FL | Speaker | LINK

Auto Tech Investments | Feb 18 | Orlando, FL | Host | LINK

Contact Us