Cars and Geopolitics: what the world means for Australian auto dealers

To say things are changing quickly for the Australian auto industry is an understatement.

Many of these head-spinning shifts are being driven by increasing geopolitical volatility. Understanding and preparing for ongoing geopolitical disruption is going to be essential for the Australian auto sector now and into the future.

In the current environment of rising geopolitical competition, power and influence are increasingly shaped through control of technology, energy and supply chains, all of which are central to the auto industry. Because of their strategic importance, governments are treating many of the basic components of the modern car, including batteries, semiconductors, software, data, critical minerals, fuel supply and charging infrastructure, as politically critical assets.

As a result, government interventions such as tariffs, subsidies, export controls, investment rules, fuel security policy and industrial strategy are shaping automotive markets much more directly than they used to.

For automotive businesses in Australia, this geopolitically volatile context changes a core operating assumption that has held largely true for the past few decades: that vehicle supply, model availability, pricing, technology choices and market access would be driven mainly by commercial factors.

‍ ‍Data presented by Australian Automotive Dealer Association CEO James Voortman in his keynote at the recent AADA conference showed how geopolitical shifts are already playing out in the Australian auto sector. James’ graphs showed a two-speed industry, with legacy brands being rapidly outsold by new players, particularly Chinese EV brands. Sales of plug-in hybrids and battery EVs are surging, while sales of petrol and diesel vehicles are falling sharply. Consumers are increasingly weighing concerns about fuel costs and supply reliability, along with environmental concerns, when thinking about what kind of vehicle will fit their needs.

As well as growing anxiety about volatile fuel markets, driven in no small part by conflict and instability in the Middle East, a major part of this rapid change for the Australian auto sector is China’s growing capability in EVs. It is worth looking into that more closely.

China’s dramatic entry into the Australian automotive market is part of a much bigger, longer and more complex story, and Australia is only one part of it.

The crib notes are that the Chinese government sees automotive as part of a broader mission of national rejuvenation after what it describes as its “Century of Humiliation”, when, according to the Chinese narrative, interference from foreign powers in the 1800s and since brought the country to its knees. In what Chinese officials see as an increasingly uncertain world, a strong automotive industry is an ideal way to move up the manufacturing value chain and reduce vulnerability. Official policy is clear about this: New Energy Vehicles are identified as a strategic sector in Made in China 2025, the purpose of which is to build national strength through advanced industry; and the 14th Five-Year Plan, from 2021 to 2025, put innovation, advanced manufacturing, strategic science and technology capability at the centre of China’s future development. Domestic decarbonisation and green development goals are also important drivers, given the effects of climate change and poor air quality on the Chinese population.

Changing the balance of global influence is part of the story as well. Chinese narratives often describe the world as dominated by Western norms and systems, which Beijing does not always see as legitimate or fit for purpose. Strength in the auto sector changes China’s global reputation and image. How that is interpreted depends on the observer, but plenty of people are impressed by what is coming out of China, even if reluctantly.

It is also worth noting that the auto industry is part of Beijing’s global story without every Chinese car being part of a geopolitical plan. China’s automotive success is one expression of a broader national strategy to move from being a market shaped by others to being a country that helps define the future of the industry, with greater control over its own developmental path.

Australia is seeing this shift very directly because we no longer have a domestic vehicle manufacturing industry in the way the US or Europe does. That has meant faster access to Chinese brands, more competition, sharper pricing and more EV and hybrid options. It also means Australian dealers are exposed earlier and more directly to one of the most important industrial and geopolitical shifts in the world economy. For Chinese brands, success in Australia matters less as volume and more as validation: proof that they can build trust, dealer networks, parts supply, aftersales support and credibility in a sophisticated, open and competitive market.

For Australian auto dealers, geopolitical risk is usually felt through ordinary business problems: a parts delay, a fuel price spike, a tariff or other trade restriction, a sudden change in brand competitiveness, a customer confidence issue, a finance constraint, a cyber concern, or uncertainty about whether a new entrant will still be in the market in five years. The change is that these issues are likely to occur more often, with greater intensity and with longer consequences. They will not simply revert to the old baseline given enough time. Preparing for this more complex and challenging environment is becoming necessary for the Australian auto sector.

I appreciate that this can feel overwhelming for people already busy running their businesses. In my contribution to the AADA conference, my message was that dealers do not need to become geopolitical experts. They can take a few practical steps to understand where their business is geopolitically vulnerable and build a plan for adapting before pressure becomes acute.

The Australian auto sector is already dealing with geopolitical change. Businesses that understand their exposures early will be better placed to make decisions before the external environment forces them to.