High-end car sales sink in China as its economy slows, taking a toll on European automakers

HONG KONG (AP) — China’s demand for foreign luxury cars is waning as customers opt for more affordable Chinese brand 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.

Slowing economy hits luxury market

Elongated property crisis This situation in China has caused many consumers to lose their appetite for large 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 are impressed by the 20,000 yuan ($2,830) trade-in subsidy offered by the Chinese government 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 the decline in demand for premium cars,” said Claire Yuan, corporate ratings director 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 auto sales in China is generally above 300,000 yuan ($42,400) and will more than double between 2017 and 2023, reaching about 15% 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% in 2024 and 13% in the first nine months of 2025.

Chinese automakers are taking a bigger bite

As luxury car sales slow down, Chinese manufacturers also electric vehicle manufacturer BYDThey have become more aggressive than many Western brands on technological innovation and frequently launch 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% in the first 11 months of this year. On Thursday, it was reported that German brands had a share of 12%, Japanese brands about 10% and US brands about 6%.

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 reduced the prices of its electric and plug-in hybrid models by up to 34%, putting pressure on major rivals such as Geely and Leapmotor.

Mercedes-Benz’s sales in China fell 27% 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 11.2% year-on-year 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% 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 market situation in the premium and luxury segment in China remained tense,” the automaker said.

Second-hand luxury cars are cheaper

The decrease in interest in luxury vehicles negatively affects dealers.

The 2024 Panamera 2.9T with a mileage of about 20,000 kilometers (12,400 miles) is priced at 950,000 yuan ($134,300), said Li Yi, a salesperson in charge of second-hand cars at a Porsche headquarters in Beijing. The previous owner bought it for about 1.4 million yuan ($198,454).

“The main reason for this is the stagnant economic situation,” Li said. “(It’s) not just Porsche. Benz, BMW, Bentley and Rolls-Royce all face the same situation.” Porsche and Bentley are part of the Volkswagen group.

Four other car dealer representatives who spoke to The Associated Press at a used-car market in Beijing described a similarly dire situation where premium cars were sold at significantly lower prices last year.

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% year-on-year due to lower demand as some trade subsidies were halted in some regions, CAAM reported on Thursday.

“Who still has money these days? People’s pockets are cleaner than their faces,” joked a used car salesman who identified himself as Hao.

The salesperson, who did not give his full name because his company was not authorized to speak to the media, said prices have been falling for two years and are offering bigger discounts.

“They now think carefully before spending,” he said.

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Associated Press researchers Yu Bing and Shihuan Chen in Beijing contributed to this report.