HONG KONG (AP) — Chinese demand for foreign luxury cars is waning as customers opt for more affordable models from Chinese brands, often sold at deep discounts, that rekindle their taste for electronics and front-end comfort.
This is bad news for European carmakers such as Porsche, Aston Martin, Mercedes-Benz and BMW who have long dominated the upper reaches of the world’s largest car market.
A declining economy hits the luxury market
A prolonged property recession in China has left many consumers with little appetite for big purchases. Meanwhile, the wealthy are becoming increasingly shy about publicly displaying their wealth, said Paul Gong, UBS head of China Auto Industry Research.
Many car buyers have been swayed by a trade subsidy of 20,000 yuan ($2,830) offered by the Chinese government for the purchase of electric vehicles and plug-in hybrids. People have tended to buy cheaper, entry-level cars where the discount will count more and those cars are mostly Chinese-made, Gong said.
“Slowing economic growth is a key driver behind weaker demand for premium cars,” said Claire Yuan, director of China auto corporate ratings at S&P Global Ratings, referring to a segment that typically includes car brands such as Mercedes-Benz and BMW.
The market share of premium car sales in China, usually priced above 300,000 yuan ($42,400), more than doubled between 2017 and 2023 to about 15% of total sales, S&P said.
That trend is now reversing. The share of premium car sales fell to 14% in 2024 and to 13% in the first nine months of 2025, S&P said.
Chinese car manufacturers take a bigger bite
While luxury car sales have slowed, Chinese manufacturers, including electric vehicle maker BYD, have become more aggressive than many Western brands in technological innovation, often releasing new electric and hybrid vehicles at lower prices, including premium vehicles, 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.”
The share of Chinese brands of passenger car sales rose to nearly 70% in the first 11 months of this year, according to the China Association of Automobile Manufacturers. Thursday reported that German brands had a 12% share, Japanese brands about 10% and American brands almost 6%.
BYD has already overtaken Volkswagen as the biggest car seller in China in recent years. BYD is the best-selling car brand so far this year in China for “new energy vehicles,” which include electric and hybrid vehicles, according to China Passenger Cars. BYD had cut the prices of its electric and plug-in hybrid models by up to 34%, putting pressure on key rivals such as Geely and Leapmotor.