For years, German automakers relied on their success in China to generate substantial profits and fuel growth. However, this profit stream is drying up, and well-known Western brands are struggling to retain buyers as market share shrinks and sales forecasts look bleak.
Sales figures from the previous quarter paint a grim picture. BMW’s sales in China dropped by 30%, Porsche by 19%, VW%, and Mercedes-Benz by 13%, resulting in none of the German giants posting positive sales growth.
It’s not that Chinese customers aren’t buying cars; they’re just not buying German ones, which are often too expensive. Instead, they’re opting for newer, more technologically advanced, and, crucially, more affordable options from domestic automakers.
While German cars still account for 15% of sales in China, their market share is declining rapidly. Pre-pandemic, they held a 25% share, according to Bloomberg. And when it comes to electric vehicles, a much larger sector in China than in the US or Europe, VW, Porsche, BMW, and Mercedes lag even further behind. Despite all four brands offering electric cars, their models account for just 10% of the market.
Competing with companies like BYD, Xpeng, and Nio might seem like an impossible task, but the German brands have no other choice. The European and American markets offer little growth potential, and some automakers have already invested too heavily in production facilities—built on state-owned land—to retreat even if they wanted to.
So, what’s the plan? The Germans are doubling down. They are forging partnerships with Chinese companies to enhance their electric vehicles and develop new products exclusively for the Chinese market, taking advantage of lower production and procurement costs, as evidenced by the joint venture that produced the Mercedes-Benz G580, the first electric G-Class from the German automaker. And, as with previous car launches, China was the first country in the world to introduce it.
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