On Sunday, Japan’s Nissan announced it will sell China-developed EVs around the world. It’s easy to see why, given the lower manufacturing costs in China. 

The move by Nissan, reported by Reuters, is another sign of how China’s growing prowess in automotive manufacturing is forcing carmakers everywhere to shift their strategies and expectations.

A key advantage for Chinese EV makers as they go global is their dominance in the supply chain, which helps them keep costs low. Consider BYD, which Berkshire Hathaway made an early bet on to great success. BYD owns the supply chain of its EV batteries, from the raw materials to the finished battery packs, and it also designs its own semiconductors.

Other Chinese EV makers, including Nio, Xpeng, and Li Auto, have similar advantages to varying degrees. 

Earlier this year, BYD launched an EV in China called the Seagull with a price of about $11,000. It quickly became one of the bestselling EVs domestically. The Seagull or similar vehicles from China could prove to be a disruptive force in overseas markets. Already, BYD’s Dolphin hatchback starts at $33,000 in Britain, according to Reuters, or nearly 30% below the comparable VW ID.3 hatchback’s starting price.

Electric vehicles “powerhouse”

China’s cost advantage is forcing legacy automakers around the world to prioritize cost cutting. Ford CEO Jim Farley said at a finance event in May, while discussing the EV future: “We see the Chinese as the main competitor, not GM or Toyota. The Chinese are going to be the powerhouse.”  

Many might assume Chinese EVs are lower in quality, and some models have had issues. In Australia, a recent recall of one model—the Ora from Great Wall Motors—warned about a “risk of serious injury or death” by electrocution during the charging process. 

But Tesla CEO Elon Musk has gone from laughing at BYD cars in 2011 to these days calling Chinese carmakers “extremely competitive,” as he said at the recent New York Times DealBook conference. “China is super good at manufacturing, and the work ethic is incredible,” he added.  

In America, subsidies in the Inflation Reduction Act offer carmakers some protection from Chinese EVs for now. But Ford Motor executive chairman Bill Ford Jr. warned earlier this year that “they will come here we think at some point, and we need to be ready.” They might come from Mexico, where top Chinese EV makers are preparing to build factories and are already selling cars—and which has a free trade agreement with the U.S.

It isn’t just automakers who are worried. In Germany, car-parts manufacturer ZF Friedrichshafen said earlier this month that it would boost sales within China. With Chinese automakers bringing their local suppliers with them as they expand overseas, “you have to take this development very seriously and adapt in order to survive,” a ZF executive told German business magazine WirtschaftsWoche.

Nissan said Sunday that it will sell its China-developed EVs in the same markets as BYD, which include Southeast Asia and Europe. Meanwhile Tesla, Ford, and BMW have been expanding their exports of cars made in China.

Within China—the world’s largest EV market by far—Nissan and other foreign makers have been losing ground to domestic brands. In reponse, Nissan will establish joint research efforts on EV technology with China’s Tsinghua University, Nissan CEO Makoto Uchida said in a statement, with the goal being to “gain a deeper understanding of the Chinese market and develop strategies that better meet the needs of customers in China.” 

That might be wise: As the experiences of Chinese EV makers suggest, if you can compete in China, you can compete anywhere.