The growth of auto sales in emerging markets provides a good opportunity for automakers. Cost is a key factor for any automaker to win in an emerging market. This paper analyzes risks and opportunities in a low cost manufacturing environment. The Chinese auto market is used as an example and three categories of risks are analyzed.A typical risk assessment for cost reduction includes the analysis of environment risks, process risks and strategic risks associated with all phases of a product life. In an emerging market, emission regulations are a rapidly-evolving environment variable, since most countries with less regulated emission codes try to catch up with the newly- developed technologies to meet sustainable growth targets. Emission regulations have a huge impact on product design, manufacturing and maintenance in the automotive industry, and hence the related cost reduction must be thoroughly analyzed during risk assessment.Diesel engines optimized for minimum Particulate Matter (PM) engine out emission with only Selective Catalytic Reduction (SCR) are proposed in this paper as the most cost effective solution for Chinese on-highway and off-highway commercial automobiles, especially for heavy-duty trucks. Given the cost challenges for fossil fuels, many governments also promote new energy technologies and electric-vehicle solutions for the automotive industry. Diesel engines with SCR aftertreatment can be easily upgraded to a Diesel Hybrid Electric Vehicle (DHEV) solution, which is a cost-effective pathway to vehicle electrification in the Chinese auto market.