Chinese consumers are turning away from foreign luxury cars, increasingly opting for more affordable domestic models that often feature advanced electronics and comfort at significant discounts.
This shift poses a challenge for European automakers like Porsche, Aston Martin, Mercedes-Benz, and BMW, which have traditionally dominated China’s premium auto market.
Economic Slowdown and Changing Consumer Behavior
A prolonged property market slump has left many consumers hesitant to make large purchases. At the same time, affluent buyers are becoming more discreet about publicly displaying their wealth, according to Paul Gong, UBS head of China Automotive Industry Research.
Government incentives are also reshaping buying patterns. A 20,000 yuan ($2,830) trade-in subsidy for electric and plug-in hybrid vehicles has nudged buyers toward cheaper, entry-level cars mostly Chinese-made where the discount has a greater impact.
“Slowing economic growth is one key driver behind weaker demand for premium cars,” said Claire Yuan, director of corporate ratings for China autos at S&P Global Ratings.
Premium Market Shrinks
The share of premium car sales in China, vehicles priced above 300,000 yuan ($42,400) had doubled to about 15% of total sales between 2017 and 2023. That trend is now reversing, falling to 14% in 2024 and 13% in the first nine months of 2025, S&P reports.
Rise of Chinese Automakers
Meanwhile, Chinese manufacturers, including electric vehicle leader BYD, are gaining ground with competitive pricing and frequent launches of new EVs and hybrids, even in the premium segment.
“Their products are more competitive and affordable, even among premium cars,” Yuan noted. “That’s why foreign brands are gradually losing momentum.”
Chinese brands accounted for nearly 70% of passenger car sales in the first 11 months of 2025, according to the China Association of Automobile Manufacturers. German brands held 12%, Japanese 10%, and U.S. brands 6%.
BYD has overtaken Volkswagen as China’s biggest car seller in recent years and leads the “new energy vehicle” segment, electric and plug-in hybrids this year. The company has cut prices of its EV and hybrid models by up to 34%, intensifying competition for rivals such as Geely and Leapmotor.
