High-end car sales in China are experiencing a downturn as the country's economy slows, impacting European automakers. This shift is driven by Chinese consumers' preference for more affordable Chinese brand models, often sold at significant discounts, which cater to their desire for advanced electronics and comfort. This trend poses a challenge for luxury carmakers like Porsche, Aston Martin, Mercedes-Benz, and BMW, who have traditionally dominated China's auto market.
The prolonged property downturn in China has left many consumers with reduced purchasing power, and the wealthy are becoming more cautious about showcasing their wealth. Paul Gong, UBS's head of China Automotive Industry Research, notes that many car buyers are now swayed by a government subsidy offering a 20,000 yuan ($2,830) trade-in for electric and plug-in hybrid vehicles. This has led to a preference for cheaper, entry-level cars, primarily Chinese-made, where the discount has a more significant impact.
Claire Yuan, director of corporate ratings for China autos at S&P Global Ratings, attributes the weakening demand for premium cars to the slowing economic growth. The market share of premium car sales in China, typically priced above 300,000 yuan ($42,400), increased significantly between 2017 and 2023 but has since reversed. In 2024, it fell to 14%, and in the first nine months of 2025, it dropped further to 13%.
Chinese manufacturers, including electric vehicle maker BYD, have gained an edge in technological innovation, frequently introducing new electric vehicles and hybrids at competitive prices, including in the premium segment. This has made their products more affordable and competitive, causing foreign brands to lose momentum. Chinese brands now account for nearly 70% of passenger car sales in the first 11 months of the year, with German, Japanese, and U.S. brands holding 12%, 10%, and 6% shares, respectively.
BYD has already surpassed Volkswagen as the top car seller in China, and it is the best-selling brand for 'new energy vehicles' this year. BYD's aggressive price cuts of up to 34% on its electric and hybrid models have put pressure on competitors like Geely and Leapmotor. This shift in the market has led to a 27% decline in Mercedes-Benz's sales in China for the July-September quarter and an 11.2% drop in BMW and Mini sales in the first nine months of 2025. Italian luxury carmaker Ferrari also reported a 13% year-on-year decrease in car shipments to China, Hong Kong, and Taiwan in January-September.
The downturn in luxury vehicle interest is affecting dealerships, with premium cars selling at lower prices. Li Yi, a salesperson at a Beijing Porsche center, noted a 2024 Panamera 2.9T with 20,000 kilometers (12,400 miles) on it, priced at 950,000 yuan ($134,300), compared to its original price of 1.4 million yuan ($198,454). This trend is not limited to Porsche; other luxury brands like Benz, BMW, Bentley, and Rolls-Royce are facing similar challenges.
The Chinese auto market's monthly production in November set a record of 3.5 million units, but domestic sales dropped 4% year-on-year due to fading demand and the suspension of trade-in subsidies in some regions. One used car salesperson, Hao, humorously noted that people's pockets are now cleaner than their faces, reflecting the economic challenges and cautious spending habits of consumers.
