German Cars Lose Their ‘Premium' Status in China
After decades of dominating China's market for high-performance cars with precision engineering, German automakers are losing out to Chinese rivals that have shifted the definition of a high-end car to one that is electric, smart and affordable.
Many new Chinese vehicles resemble their German rivals, like the wildly popular Xiaomi SU7, which mimics Porsche's Taycan. The SU7 rivals the Taycan in power and braking, but it also includes integrated artificial intelligence that can, for instance, help with parking and greet drivers with their favorite song. The cherry on top: It sells for roughly half the price of a Taycan.
As a result, the German automakers that for decades commanded China's premium car market are now seeing their sales dwindle, while Xiaomi — a leading Chinese smartphone manufacturer — last year sold more than 100,000 models of the SU7.
Among the hardest hit has been Porsche, which reported last month that its deliveries in China plunged 28 percent in 2024. Although Porsche's sales were up in every other region around the world, the decline in China was significant enough to pull down its global deliveries for the year by 3 percent.
For years, German automakers relied on the Chinese market to make up for weaker demand elsewhere, leading them to ignore deeper structural problems at home. Chief among them was a reluctance to adopt the technology that has come to define driving in China: electric vehicles equipped with sophisticated software and, increasingly, artificial intelligence.
'The German, but also the American and the Japanese-Korean, established Western manufacturers have greatly underestimated the development dynamics of the Chinese manufacturers, namely in the important fields of electro-mobility and software-defined vehicles,' said Stefan Bratzel, director of the Center for Automotive Management in Bergisch Gladbach, Germany.
Market experts said advances in software and features such as automated driving and remote control had become standard in Chinese electric cars, pressuring European automakers used to cashing in on their brand names to step up their game.
'I think Chinese consumers right now are ready to accept that Chinese companies can produce cars that are considered as premium to them,' said Gary Ng, an economist with Natixis Corporate & Investment Banking.
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