An employee works on a new energy vehicle assembly line at a BYD factory in Huaian in China's eastern Jiangsu province on July 6, 2020. (Photo by CN-STR / AFP via Getty Images) / China OUT

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China’s auto industry, despite falling sales at home, continues to cast a shadow over the world auto industry, consulting firm AlixPartners said in an annual report.

China’s home market saw deliveries fall 18% in the first four months of 2026, AlixPartners said in a presentation on Wednesday. The consulting firm projected that will improve the rest of the year while still declining 10% for all of 2026.

At the same time, China’s auto industry is spooking established automakers in North America, Europe and Asia, according to AlixPartners.

China has devised ways to reduce costs and vehicle development time. Chinese automakers can bring new vehicles to market in three years, compared with five for legacy automakers.

The Chinese industry also is moving into new markets.

Chinese producers are entering markets such as Germany and France “at a fairly rapid clip,” said Stephen Dyer, head of AlixPartners’s Asia and industrials consulting franchise.

Dyer said Chinese OEMs “have a cost advantage” and want to manufacture globally.

Chinese automakers are leading the charge for electric vehicles. Under the Trump administration, the U.S. is retreating from EVs and continues to emphasize traditional internal combustion engine (ICE) vehicles. The U.S. also is seeing strong sales of hybrid vehicles, which combine ICE and electric technology.

AlixPartners said that divide may present challenges for the U.S.

“ICE and hybrid buyers in the U.S. present significant margin opportunities for companies in the near-term, but that could present a major longer-term risk,” Dan Hearsch, global co-leader of the automotive and industrial practice at AlixPartners, said in a statement.

“Becoming complacent within a protectionist wall could inevitably open the door to Chinese companies to take share in the U.S. marketplace through joint ventures, licensing or other indirect methods.”

The Trump administration has sought to undo long-standing trade agreements between the U.S. with Canada and Mexico.

The U.S. needs to work with Mexico and Canada to “challenge China,” Mark Wakefield, global automotive lead for AlixPartners, said at the Wednesday presentation.

Wakefield said the focus should be for the U.S. to compete with China, rather than Mexico and Canada.

The AlixPartners executive said the U.S. has strengths with technology and “high-value manufacturing” while Canada excels with raw materials and processing and Mexico contributes to “labor-intensive subassembly.”