By Rachel McCleery, Executive Director, SAFE’s Coalition for Reimagined Mobility
- The tipping point: The world is experiencing new breakthroughs in software-defined mobility and global electric vehicle adoption at a time when Chinese automakers are exporting vehicles in record-high numbers.
- The gap: The United States trails on vehicle and battery cost, lacks a battery supply chain that can compete at scale, and is unprepared for the chips, computing and power demands of software-defined vehicles.
- The need: The Connected Vehicle Security Act buys time, but walls will not win this race. America needs a bold, sustained automotive strategy that is connected to the nation’s broader effort to innovate and reindustrialize. That strategy has yet to be written.
For vehicle manufacturers and mobility companies, this year will be remembered as the year of AI-enabled milestones and the year the gasoline-only car lost its global market share majority. In the first half of 2026, vehicles with no battery propulsion system fell to 49 percent of global new-car sales, down from 73 percent in 2021, according to Mobility Global data reported by Nikkei. Hybrids took 18 percent of the market and fully electric vehicles 17 percent.
These vehicles aren’t coming from North America, Europe, South Korea or Japan, they’re being exported from China at rates that have never been seen before.
According to Michael Dunne of Dunne Insights, Chinese brands will sell more than a million cars in Europe this year, roughly a tenth of the market, and hold about 20 percent of the market in the United Kingdom and Mexico and a third in Australia. These are markets where American and allied brands once competed head-to-head. They are leading indicators of what comes next along with an emerging, important unknown: the evolution of software-defined vehicles.
Cars are increasingly becoming computers on wheels with companies competing to develop the most sophisticated, user-friendly vehicle software systems. To keep pace with these developments, General Motors recently announced a significant tech overhaul, including building advanced computing systems for drivers and expanding autonomous driving across both electric and gas-powered vehicles. Rivian began work to develop its own custom chip with Arm and TSMC and has its own AI models to power its in-vehicle assistant. It’s the right time for industry to lean into these business segments. While the U.S. has a leg up on China when it comes to technology and AI broadly, it lags in translating those advancements to vehicle features.
How Far Behind We Are
In 2023 the U.S. auto manufacturing industry accounted for 4.8 percent of gross domestic product and employed 10.1 million people through direct and indirect jobs. The future of this industry and where these numbers go will be decided on five fronts: chips, sensors, power electronics, batteries and electric motors.
The United States and its allies are the furthest behind on batteries, which is the single most expensive component in an electric vehicle. Battery electric vehicle packs averaged $99 per kilowatt-hour globally in 2025, according to BloombergNEF. Average pack prices in China were $84, while North American packs cost 44 percent more. On a U.S.-built, sub-$30,000 commuter car with a 65-kilowatt-hour pack, that gap amounts to a premium of roughly $2,400 on the battery alone, and it grows with every additional kilowatt-hour a larger vehicle requires.
Behind the battery sits a supply chain the United States does not control, and has not even fully mapped. Sensors, power electronics, electric motors, and chips all depend on mineral inputs whose processing is heavily concentrated in China. From processed minerals through cathodes and cells, America still lacks a domestic battery supply chain that can compete at scale.
China has spent more than a decade subsidizing the mastery of battery chemistry, manufacturing processes and integrating their automotive supply chains. These sustained efforts have driven down cost and have well-positioned Chinese owned firms for the future.
That’s because many of these same components and their supply chains overlap with digital vehicle assets. Over-the-air systems, telematics modules, and cloud platforms require both existing and more sophisticated chips to run. A modern car on the road today, for example, can contain as many as 3,000 chips. That number is only going to increase. SAFE’s 2025 report, AI in Motion: Securing America’s Edge in Safer, Smarter Transportation, found that as vehicles advance from Level 2 driver assistance to Level 5 full automation, computing requirements scale exponentially, from hundreds of billions to more than a quadrillion calculations per second per vehicle. A fully automated vehicle could require up to 2,500 watts of continuous computing power on top of its propulsion needs. That means the next generation of cars will draw on the same chips, power, and engineering talent driving the AI buildout across the economy, making efficient chips and abundant generation part of the automotive equation. All of this will require a significant amount of financial investment.
Reactive Policy Will Not Close the Gap
Against this stark backdrop, automotive policy in 2026 has been largely reactive. Congress responded to the threat of Chinese vehicles entering North America with the bipartisan Connected Vehicle Security Act (CVSA), which advanced unanimously out of the Senate Commerce Committee in July and has drawn the support of varied groups, including SAFE’s Energy Security Leadership Council. This legislation protects American drivers, data, and infrastructure from surveillance and cyber threats tied to foreign adversaries and builds an important firewall as Chinese vehicle imports into Canada and Mexico increase. This legislation also buys the U.S. auto industry time to deliver competitive, affordable products to consumers. Something that won’t be achieved at speed or scale without federal intervention.
Back to the Drawing Board
U.S. automotive competitiveness will not be restored in an election cycle. It requires going back to the drawing board to assess what new, modified and existing federal tools can work together as one system to drive down the price of a new U.S.-made vehicle and allow the U.S. auto industry to compete once again on a global scale. The approach is threefold: map the current state of play with clear eyes, build bold electro-industrial policy equal to the scale of the challenge, and make that policy durable enough to withstand any single administration. Without this effort, we will continue to be playing policy defense and lose an industrial base that is integral to our country’s economic well-being.
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