I dealt with the strangest feeling of déjà vu yesterday. After Western pledged countless billions of dollars toward a new technology they’re heralding as the future, a new player has emerged from an unexpected place: China. It turns out that China can make the same tech, except cheaper, faster, with fewer resources overall. To top it all off, it’s better.
Now those Western companies are scrambling to figure out how this happened right under their noses—and what, if anything, they can do to catch up.
I am, of course, talking about the stunning debut of China’s DeepSeek’s R1 artificial intelligence model, which sent tech stocks into a tailspin on Monday after its latest release was shown to outperform Western AI models at a fraction of the cost . Silicon Valley is in a tizzy; companies like OpenAI are being called to the carpet about why they need to raise so much money, and what investor returns will actually be someday; and chipmaker Nvidia alone took the biggest one-day wipeout in U.S. stock-market history.
But my case of déjà vu came from all of the news stories I read about DeepSeek’s rise. That’s because you could replace any number of nouns in those stories with the names of automotive companies also dealing with an increasingly dominant China, and the story would be pretty much the same.
The AI industry is now “shaken to its core” much as the car industry was during the 2023 Shanghai Auto Show, the first major post-pandemic event where the world got a taste of how advanced China’s electric vehicles and software are. DeepSeek’s advancements are being called a “Sputnik moment,” a Cold War-era phrase we’ve used to describe the EV race before too. Meta has even convened “war rooms” of engineers to dissect DeepSeek’s AI to figure out how it works at such a lower cost, while seeing what lessons can be applied to its own AI program.
Sounds a lot like Ford’s secretive “skunkworks” project designed to build a low-cost EV platform from the ground up, much as the Chinese automakers have mastered.
The only thing I’m shocked about is how surprised the Wall Street analysts, tech journalists, venture capitalists and politicians are today. “How did China get so far ahead?” is now the question that potentially trillions of dollars in investments are riding on. But this is something we’ve known in the automotive space for some time.
Photo by: Xiaomi
I almost don’t even need to recap how that happened, but it went something like this: China became the world’s largest car market during the 2000s, driven by its meteoric economic boom, which brought tons of Chinese buyers into the car-buying market for the first time ever. Western and other Asian automakers who went there had to engage in joint ventures with Chinese car companies—some of them state-owned, some not—in order to play ball, but that was a small price to pay to sell cars to a country whose vast population was economically rising in the world so quickly. Those automakers assumed China would be both the world’s sweatshop and a permanent cash cow forever.
Photo by: Patrick George
Zeekr Mix and 001 FR at CES 2025
But then something unexpected happened: China’s automakers took the lessons from ours, most notably Tesla, and ran with them. Coupled with copious government investments into battery technology, an intensely competitive internal market and a laser focus on advanced software features, China’s EVs are now largely considered well ahead of the ones Americans have access to. How, you ask? Better to ask how not; performance, EV range, battery technology, connected features, charging times and electric infrastructure all trump what’s sold in our market. Our own Kevin Williams has experienced many of these things for himself. I have a little bit, too. And the answer is yes, the EVs and hybrids made in China really do surpass our own.
This has been the case for a while now. It’s just that the rest of the world—Americans specifically—have not fully noticed yet.
Tariffs and restrictions on Chinese-made automotive software have kept those cars out of the U.S. market. Those may be a band-aid; temporary solutions at best. But this situation is a daily reality in Europe right now, when new players like MG and BYD steal sales from Volkswagen and Audi at an alarming rate—then weigh whether to buy the factories of the companies they’re squeezing.
Of course, cars and AI are not the same thing. (Not yet, anyway.) But America’s failure to realize that China even could be this on par or ahead on some new technology is reflective of a misplaced exceptionalism, a kind of arrogance, that this country can ill afford in the future. Just like the cars from Zeekr, Xiaomi and BYD, DeepSeek’s rise proves that, no, China is not just a bunch of low-cost copycats with no original ideas of their own and no ability to challenge whatever hold America thinks it still has on the world.
Wall Street, the media and the general public have a weird way of misunderstanding how the auto industry works. So it took a Chinese upstart tanking their collective Nvidia stock-price-billionaire dreams to get them to wake up, and now, here we are.
A lot of people today are wondering, “How did this happen?” But if you follow the auto industry at all, the question instead becomes: “What did you think was going to happen?”
I’m hardly an AI expert, of course, so it’s hard for me to state with complete certainty that DeepSeek’s AI is worthy of this panic. There are certainly reasons to be skeptical of DeepSeek’s claims, and questions about whether the chips it used to achieve these feats violated any U.S. export controls (Or if those controls simply backfired because they forced the Chinese firm to innovate on their own.) But between the EV race, the battery race and now the AI race, perhaps the most important question in America and Europe and beyond for the next few years will be: “How do we get ahead?”
Photo by: InsideEVs
At least in the American car industry, some seem thrilled to be able to bury their heads in the sand instead. They’re the ones welcoming a potential end to the urgent pressure to make great EVs and software platforms quickly. Under the new administration, they may welcome the chance to relax, take their time, work on their own schedules and double down on gas-powered trucks and SUVs like they always have. The tariffs and restrictions will take care of things, they seem to think; intense competition can be met with complacency and business as usual. No need for the copious investments into clean energy and next-generation vehicles that marked the Biden years; the market can sort it all out.
Just like the market sorted some things out for Meta, Nvidia and the rest on Monday.
The point is that an era of intense technological competition with China isn’t just about to begin, it’s well underway already. How the U.S., Europe and the rest of the world meet that challenge may well define the rest of this century.
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