HONG KONG (AP) — Chinese demand for foreign luxury cars is falling as customers opt for more affordable Chinese-branded models, often sold at deep discounts, satisfying their taste for luxury electronics and comfort.
That’s bad news for European carmakers like Porsche, Aston Martin, Mercedes-Benz and BMW, which have long dominated the top end of the world’s biggest auto market.
A slowing economy hits the luxury market
A prolonged property slump in China has left many consumers with little appetite for big purchases. Meanwhile, the wealthy are becoming more shy about publicly displaying their wealth, said Paul Gong, UBS head of China Automotive Industry Research.
Many car buyers were swayed by a 20,000 yuan ($2,830) trade-in subsidy offered by the Chinese government for the purchase of electric and hybrid vehicles. People have tended to buy cheaper, entry-level cars where the discount will matter more, and those cars are mostly made in China, Gong said.
“Slowing economic growth is a key factor behind weaker demand for premium cars,” said Claire Yuan, S&P Global Ratings’ China head of corporate car ratings, referring to a segment that typically counts car brands such as Mercedes-Benz and BMW.
The market share of premium car sales in China, typically priced above 300,000 yuan ($42,400), doubled between 2017 and 2023 to about 15 percent of total sales, S&P said.
This trend is now reversing. The share of premium car sales fell to 14 percent in 2024 and 13 percent in the first nine months of 2025, S&P said.
Chinese automakers are taking a bigger bite
While sales of luxury cars have slowed, Chinese manufacturers, including electric vehicle maker BYD, have become more aggressive than many Western brands in terms of technological innovation, frequently launching new cheaper electric and hybrid vehicles, including premium vehicles, analysts said.
“Their (Chinese automakers’) products are more competitive and affordable even in the premium segment,” Yuan said. “That’s why these foreign brands are gradually losing momentum.”
Chinese brands’ share of car sales rose to nearly 70 percent in the first 11 months of this year, according to the China Association of Automobile Manufacturers. It reported Thursday that German brands held a 12 percent share, Japanese brands about 10 percent and American brands nearly 6 percent.
BYD has already overtaken Volkswagen as China’s biggest car seller in recent years. BYD is the best-selling car brand so far this year in China for “new energy vehicles,” which include electric vehicles and hybrids, according to the China Automobile Association. BYD has slashed the prices of its electric and plug-in hybrid models by up to 34 percent, putting pressure on major rivals such as Geely and Leapmotor.