Germany’s big carmakers used to lead the race in China, but now they’re ‘for the parents’

BEIJING, April 21 (Reuters) – More than 40 years after Volkswagen turned heads at its first auto show in China, it has lost its cutting-edge status in the country as domestic brands keep pace with tech-hungry young drivers.

The “Made in Germany” internal combustion engine legacy is no longer so relevant in the world’s largest auto market, where local automakers are launching flashy, affordable electric vehicles that are essentially mobile phones on wheels.

“Perhaps some younger customers perceive us as the parents’ brand,” Robert Cisek, Volkswagen brand’s China CEO, told Reuters.

Blinded by the rapid rise of Chinese brands, sales of Volkswagen, its Porsche and Audi units, and rivals BMW and Mercedes-Benz have slumped, leaving them scrambling to stem the bleeding in a market that once accounted for a third of their sales.

After spending a quarter-century as China’s No. 1 automaker, Volkswagen was overtaken by EV heavyweight BYD in 2024 and pushed into third place by Geely in 2025.

Cisek said it was “beyond imagination” that China’s auto market would transform from a growth driver to a battleground for these companies.

FROM MARKET LEADERS TO HOME END

When Volkswagen attended the first Chinese auto show in Shanghai in 1985, locals were impressed by the quality of the German automaker’s marketing materials.

“We were greeted by an unimaginably large crowd and our brochures flew off the shelves,” then-CEO Carl Hahn, who oversaw the company’s entry into China, wrote in his memoirs. “Back then, it was enough for people to admire the quality of paper and printing and dream of owning a car.”

Now, the German auto group needs more than glossy paper to make a comeback at this year’s Beijing Auto Show, which starts on Friday.

Automakers like Volkswagen, which dominates internal combustion engine car production, find themselves racing to catch up in a market where more than one in four new cars are fully electric.

As China’s auto market grows and local brands introduce scores of consumer-friendly EVs, German automakers have lost ground. Collectively, their sales fell by a quarter over the five-year period to 3.9 million vehicles in 2025, according to S&P Global Mobility data.

Analysts said the challenges were exacerbated this year as Chinese brands made inroads into the premium segment, targeting affluent consumers who once coveted German quality.

Sitting thousands of miles away at their headquarters in Wolfsburg, Stuttgart and Munich, German auto executives underestimated the ability of Chinese automakers to dominate the EV development process so quickly.

“They didn’t see this big change coming and the speed at which it was coming,” said automotive consultant Felipe Munoz.

Germany’s legacy automakers will have to turn around their business in China or lose interest in a country seen by executives such as Volkswagen CEO Oliver Blume as a training ground for building the cars of the future.

Under Blume, Volkswagen Group plans to launch 20 so-called “new energy vehicles” in China this year, including all-electric models, plug-in hybrids and EVs with small combustion engines known as range extenders.

The company will premiere four new EVs in Beijing on Tuesday ahead of the opening of the auto show; these include mass-market prospects developed with Chinese partners FAW and EV maker Developed jointly with China’s SAIC.

THE BURDEN OF INHERITANCE

Yale Zhang, managing director of Shanghai-based research firm Automotive Foresight, said German brands were “murdered” by their own heritage and resistance to rapid change.

“You can’t really rely on your chrome metal strips, Napa leather seats, and ‘hundred-year’ history to convince consumers,” Zhang said.

German automakers have also been reluctant at times to adopt the technology of their new Chinese rivals.

Now Volkswagen, Mercedes and BMW are increasingly relying on Chinese suppliers, including autonomous driving leader Momenta and in-car software developer ECARX.

While “Made in Germany” remains a trusted sign internationally, including in China, younger consumers are more likely to avoid German cars, according to a consumer survey by AlixPartners conducted by Berylls in January.

“The good thing is, of course, that reliability exists when it comes to Volkswagen’s safety, reliability and quality,” Cisek said. “It’s also a bit of a burden.”

(Reporting by Ju-min Park, Rachel More and Zhang Yan; Editing by Nick Carey, Alexander Smith and Thomas Derpinghaus)