Chinese Buyers Abandon European Luxury Cars for Domestic Brands

The Luxury Car Market Collapse

China's once-booming luxury car market is experiencing a dramatic shift that's sending shockwaves through European automakers. Chinese demand for foreign luxury cars is waning as customers opt for more affordable Chinese brand models, often sold at big discounts, catering to their taste for fancy electronics and comfort. The numbers tell a stark story: Porsche AG reported a significant drop in its 2024 sales in China, with figures tumbling by 28% year-over-year.

The downturn extends beyond Porsche. Italian luxury carmaker Ferrari reported a 13% year-on-year drop in car shipments to mainland China, Hong Kong and Taiwan in January-September. It was the only region where sales declined during that time. Similarly, Mercedes-Benz and Volkswagen also reported declines in their China sales for 2024, with Volkswagen noting an 8.3% fall and Mercedes-Benz seeing a 7% drop.

The impact is visible at dealerships across China. Li Yi, a salesperson in charge of second-hand cars at a Beijing Porsche center, said a 2024 Panamera 2.9T with a mileage of about 20,000 kilometers (12,400 miles) was priced at 950,000 yuan ($134,300). The previous owner bought it for about 1.4 million yuan ($198,454). "It's mainly due to the sluggish economic situation," Li said.

Economic Pressures Reshape Consumer Behavior

A prolonged property downturn in China has left many consumers with little appetite for big purchases. But the economic slowdown isn't the only factor at play. Meanwhile, the well-to-do are becoming increasingly shy about publicly displaying their wealth, said Paul Gong, UBS head of China Automotive Industry Research. This cultural shift represents a fundamental change in how affluent Chinese consumers view luxury purchases.

Government incentives are also steering buyers toward domestic alternatives. Many car buyers have been swayed by a 20,000 yuan ($2,830) trade-in subsidy offered by the Chinese government for purchasing electric and plug-in hybrid vehicles. People tended to purchase cheaper, entry-level cars where the discount will count more and those cars are mostly Chinese made, Gong said.

The luxury market's contraction is measurable. The market share of luxury vehicles, typically priced above 300,000 yuan ($42,400), saw a remarkable increase from 7% in 2017 to about 15% in 2023. However, this trend has reversed, with the share of premium car sales dropping to 14% in 2024 and further declining to 13% in the first nine months of 2025.

Chinese Brands Seize Market Share

As European luxury brands struggle, Chinese manufacturers are capitalizing on the opportunity. While luxury auto sales have slowed, Chinese manufacturers, including electric vehicle maker BYD, have become more aggressive than many Western brands in technological innovation, frequently rolling out new electric vehicles and hybrids at cheaper prices, including premium vehicles, analysts said.

Their (Chinese carmakers') products are more competitive and more affordable even in the premium segment," Yuan said. "That's why these foreign brands are gradually losing momentum." The results speak volumes: The Chinese brands' share of passenger car sales climbed to almost 70% in the first 11 months of this year, according to China Association of Automobile Manufacturers.

European automakers now find themselves in unfamiliar territory. Ola Källenius, CEO of Mercedes-Benz, told investors in late October that "hyper-competition in China is not going away anytime soon." The competitive landscape has fundamentally shifted, with Chinese brands offering advanced technology and competitive pricing that European luxury makers are struggling to match.

The Road Ahead

This transformation represents more than a temporary market correction. Chinese consumers are demonstrating a clear preference for domestic brands that offer cutting-edge technology at accessible prices. The combination of economic uncertainty, changing cultural attitudes toward wealth display, and government support for domestic electric vehicles has created a perfect storm for European luxury automakers.

The automotive industry's future in China will likely depend on how quickly foreign brands can adapt to these new realities. Those that can offer compelling value propositions while respecting local preferences may survive, but the days of European luxury brands dominating China's premium car market appear to be ending. The shift signals a broader trend of Chinese consumers choosing homegrown alternatives across various industries, potentially reshaping global luxury markets for years to come.