Energy Musings - February 20, 2026
As Detroit auto executives tally their EV losses, they are struggling to set a path forward. Ford has reportedly talked with Chinese auto companies about a possible joint venture.
The Chinese Are Coming the Chinese Are Coming
The title of this Energy Musings is a play on the title of a 1966 American comedy movie, “The Russians Are Coming the Russians Are Coming.” It was based on the interactions between the crew of a Russian submarine that had accidentally run aground on a sandbar off a small New England island and the townspeople. The crew goes ashore seeking help while pretending to be Norwegian sailors. That sets up many humorous misunderstandings and chaos among the residents who fear a Russian invasion. The cast, led by Alan Arkin, included several leading comedians, including Carl Reiner and Jonathan Winters, and other leading actors such as Brian Keith and Eva Marie Saint.
The Chinese we are talking about coming to the U.S. are not part of a movie, nor are they coming in a submarine. Their possible arrival, however, has generated a flurry of misunderstandings and chaos in the domestic automobile industry. People who follow the auto industry may have read that Jim Farley, the CEO of Ford Motor Company, is discussing joint ventures with Chinese automobile manufacturers. That may have been an overstatement, but it was part of the misunderstanding of what is going on and what it means for electric vehicles (EVs).
Stepping back, the question is: what should American automobile manufacturers do with their EV businesses, given current market conditions, the lack of buyer subsidies, and the massive capital losses they have posted? As we and others have chronicled for years, the push for EVs was driven by an agenda that they were the key to the U.S. meeting its Net-zero carbon emissions goal. These non-emitting vehicles would displace the smoking tailpipes of internal combustion engine (ICE) vehicles. To effect this transition, the nation needed a mandate that all Americans would own EVs. The challenge was determining how quickly the vehicle fleet transformation would occur, meaning the government needed to determine when auto buyers would be able to purchase EVs only.
Unfortunately, the public rebels when told it will not have the same choice in vehicles or anything else, as it has in the past. New technologies are embraced when people understand that they solve issues existing products do not. That had not been the case with EVs. They were significantly more expensive due to the cost of their batteries. The cars needed a different fueling system, requiring owners to either install chargers in their garages or find public charging stations. Refueling took much longer than filling up at a gas station.
EV owners also discovered that their insurance costs were much higher because damaged EVs were often scrapped rather than repaired. Tires were wearing out faster, and they are expensive to replace. EVs often didn’t perform well in cold weather because the battery has to power the vehicle’s heater and defroster, reducing range. Then there was the range anxiety issue. Battery life limits the miles EVs can travel, and drivers’ anxiety grows when finding a charging station becomes difficult. There is also the uncertainty about the charging station’s working status.
Unsurprisingly, the pickup in EV sales began slowly, as there was only a limited number of models, and an equally small number of early adopters. While attracting buyers remained a challenge, auto manufacturers were going all-in on EVs, having bought into the government’s net-zero narrative. Companies were investing substantial amounts of capital in new battery and EV assembly lines. They were forced to make the investments in the belief that if they were late with EV offerings, the momentum would be lost, just as the government was forcing the market to grow.
For the companies, financial losses from EV sales were mounting. Customers were not buying these expensive vehicles at the pace forecasters had predicted. However, the auto executives remained convinced that the path they were traveling would lead to a financial bonanza. That belief, however, was shaken when Donald Trump was re-elected with his anti-EV, renewable energy, and climate change agenda. It resulted in legislation eliminating the financial subsidy for EVs. The timing of the subsidy’s end marked a dramatic shift in the momentum of the EV market. Auto executives were suddenly left to tally the EV losses they had incurred through one of the most significant misallocations of capital in the history of the automobile industry.
Our friend Robert Bryce has done a good job of tracking the EV losses. He recently noted that the industry’s EV leaders had cumulative losses and asset write-downs totaling $114 billion from 2022 through the third quarter of 2025. That number will likely rise once all the financial costs are accounted for.
While the U.S. EV market shrank in January, global sales declined 3% year over year. According to a report from Electrek, global EV sales in January totaled 1.2 million units, 44% below December 2025 sales. In January, EV sales in North America fell 33% year over year, with U.S. sales the lowest since 2022.
A 20% year-over-year decline in China’s EV sales materially impacted the global EV market’s January downturn. More significantly, China’s January EV sales were down 55% compared to December 2025. The market downdraft was driven by significant changes to China’s EV subsidies. It instituted a 5% purchase tax, reversing the tax-exemption policy that had been in effect since 2014. The generous EV trade-in scheme was also significantly altered, diminishing the value of trade-ins for new EV purchases.
The only world EV market to grow in January was Europe, where sales were 320,000 units, a 24% year-over-year increase despite a 33% decline from December. Sales continue to rise as key countries like the U.K., Germany, and France push EVs as the key to reducing emissions.
Beyond the major regions, January EV sales nearly doubled, with South Korea, Brazil, and Thailand leading the growth.
There are few signs that major trends in EV sales are changing. Therefore, auto company executives must reassess their EV strategies, which is why there has been so much attention to Farley’s comments about Ford and joint ventures with Chinese automakers. The idea of allowing Chinese companies to build vehicles in the United States is raising eyebrows. Why would we allow our chief economic and military adversary to gain access to the U.S. market?
The question was put to former Ford CEO Mark Fields on CNBC. Several years ago, Fields told a CNBC reporter that he had driven various Chinese automobiles and found their quality to be “very, very good.” He explained that the high quality was a result of China having missed the global ICE market, so they elected to double down on EVs. Their effort was helped by China’s access to cheap labor and energy, as well as the ready supply of critical minerals needed for batteries. EVs became a key component of China’s industrial strategy to dominate global green energy equipment markets, and delivering a quality product was critical.
Fields commented on the challenges facing American auto executives who are trying to protect their profitable domestic market while Chinese auto companies creep closer to the U.S. market. He was referring to the presence of Chinese automakers in Mexico and potentially in Canada. Another challenge is that Chinese and American auto companies are facing off in international markets.
The idea of Ford forming a joint venture with a Chinese automaker would require significant adjustments to U.S. policies. Reportedly, Farley has held discussions with the Trump administration about what would and wouldn’t be acceptable.
Why would Ford consider forming a Chinese joint venture? According to Fields, this would be a “cut and paste” of China’s policy when it welcomed American auto companies. The companies had to form a joint venture with a Chinese auto company to operate. These joint ventures were a way to transfer technology and enable Chinese auto manufacturers to gain knowledge in building modern vehicles.
What would an American auto company gain from a joint venture with a Chinese company? Chinese partners may help lower costs and boost technology, especially in connected vehicles. There is a potential risk with the latter, which explains why the administration would want safeguards about the technology.
For Ford, which has exited the low-price, sedan market, the expertise of a Chinese partner might help Ford compete in this market again, according to Fields.
However, in Fields’ estimation, a Chinese joint venture brings regulatory, political, and reputational risks. “The strategic and reputational risks are monumental,” he offered. In other words, prospects of Ford and a Chinese automaker forming a U.S. joint venture are likely very low, and we should not expect an announcement anytime soon.