High-end car sales sink in China as its economy slows
China’s demand for foreign luxury cars is waning as customers opt for more affordable Chinese-branded models that appeal to their tastes for luxury electronics and comfort, often sold at deep discounts.
This is bad news for European automakers such as Porsche, Aston Martin, Mercedes-Benz and BMW, which have long dominated the upper end of the world’s largest auto market.
The long-running real estate crisis in China has caused many consumers to lose their appetite for big purchases. Meanwhile, wealthy individuals are becoming increasingly wary of publicly displaying their wealth, said Paul Gong, head of UBS China Automotive Industry Research.
Many car buyers have been hit by the Chinese government’s 20,000 yuan ($A4,250) trade-in subsidy for the purchase of electric and plug-in hybrid vehicles.
Gong said people tend to buy cheaper, entry-level cars where rebates will be more of a consideration and those cars are mostly Chinese-made.
“Slowing economic growth is one of the key factors behind weak demand for premium cars,” said Claire Yuan, director of corporate ratings for China autos at S&P Global Ratings, referring to a segment that typically considers car brands such as Mercedes-Benz and BMW.
The market share of premium car sales in China, generally priced at more than 300,000 yuan ($63,690), will more than double between 2017 and 2023, reaching about 15 percent of total sales, S&P said.
This trend is now reversing. S&P stated that the share of premium car sales will drop to 14 percent in 2024 and 13 percent in the first nine months of 2025.
As luxury car sales slow, Chinese manufacturers including electric vehicle maker BYD have become more aggressive in technological innovation than many Western brands, frequently introducing new electric vehicles and hybrids, including premium ones, at cheaper prices, analysts said.
“Their (Chinese automakers’) products are more competitive and more affordable, even in the premium segment,” Yuan said.
“That’s why these foreign brands are gradually losing momentum.”
According to the China Association of Automobile Manufacturers, the share of Chinese brands in passenger car sales rose to almost 70 percent in the first 11 months of this year.
It was reported on Thursday that German brands had a 12 percent share, Japanese brands had a 10 percent share, and U.S. brands had a share of about 6 percent.
BYD has overtaken Volkswagen as the largest auto dealer in China in recent years.
BYD is the best-selling car brand in China so far this year in terms of “new energy vehicles”, which include electric vehicles and hybrids, according to the China Passenger Vehicle Association.
BYD has put pressure on major rivals such as Geely and Leapmotor by reducing the prices of its electric and plug-in hybrid models by up to 34 percent.
Mercedes-Benz’s sales in China fell 27 percent in the July-September quarter from a year earlier, according to its latest earnings report.
The number of BMW and its subsidiary Minis sold in China fell by 11.2 percent on an annual basis in the first nine months of 2025. Porsche and Aston Martin also cited pressure from weak demand in China.
Italian luxury carmaker Ferrari reported a 13 percent year-on-year decline in car shipments to mainland China, Hong Kong and Taiwan in the January-September period. This was the only region where sales decreased at the time.
Mercedes-Benz CEO Ola Källenius told investors in late October that “hypercompetition in China will not end anytime soon.”
The decrease in interest in luxury vehicles negatively affects dealers.
China’s monthly auto production in November hit a record, surpassing 3.5 million units for the first time, but domestic auto sales fell 4 percent year-on-year due to lower demand as some trade subsidies were halted in some regions, CAAM reported on Thursday.
