Demand for foreign luxury vehicles in China is experiencing a significant downturn as consumers increasingly gravitate toward more affordable domestically produced models. This shift is notably detrimental for European luxury carmakers such as Porsche, Aston Martin, Mercedes-Benz, and BMW, who have long maintained a stronghold in one of the world’s largest automotive markets.
Several factors contribute to this declining demand, foremost among them is the country’s sluggish economy. An ongoing property market decline has led to a tightening of consumer spending, making high-priced luxury vehicles less appealing. Paul Gong, the head of China Automotive Industry Research at UBS, emphasizes a growing consumer hesitance to flaunt wealth, opting instead for more discreet purchasing behavior.
In addition, a government trade-in subsidy of 20,000 yuan (approximately $2,830) encourages consumers to buy electric and hybrid vehicles, often manufactured by Chinese brands. This incentive has shifted consumer interest toward more economical, entry-level options, which are predominantly produced by local manufacturers. “Slowing economic growth is one key driver behind weaker demand for premium cars,” said Claire Yuan, director of corporate ratings for China autos at S&P Global Ratings.
The market dynamics, however, show a concerning reversal for the premium car segment, which saw its sales share decline from 15% in 2023 to 14% in 2024, and further down to 13% in the first nine months of 2025. Meanwhile, Chinese automakers like BYD have made substantial advancements in technological innovation, rolling out new electric and hybrid vehicles that are not only more affordable but also increasingly competitive in the luxury segment. As a result, foreign brands are losing ground to their Chinese counterparts. Reports indicate that Chinese manufacturers captured almost 70% of passenger car sales in the first 11 months of the year, with German brands holding only 12%.
BYD has recently outpaced Volkswagen to become the leading car seller in China, especially in the new energy vehicle sector, significantly impacting competitors like Geely and Leapmotor, which are being pressured by BYD’s aggressive pricing—some models seeing price cuts of up to 34%. This environment has affected traditional luxury brands significantly; for instance, Mercedes-Benz reported a 27% drop in unit sales from the previous year during the July-September quarter, while BMW experienced an 11.2% decline in the first nine months of 2025. Similarly, luxury carmaker Ferrari noted a 13% drop in shipments to mainland China, Hong Kong, and Taiwan—in stark contrast to growth in other regions.
The ripple effects of changing consumer preferences are also felt in the used car market, with significant price reductions on premium vehicles. A sales representative at a Beijing Porsche center noted that a 2024 Panamera was listed for considerably less than its purchase price just a year prior, a situation echoed by representatives across various dealerships. The overall mood in the used luxury car market sounds alarm bells, with many salespeople reporting a marked decrease in demand and extreme price sensitivity from consumers.
Despite a record-breaking monthly auto production figure of over 3.5 million units, recent reports from the China Association of Automobile Manufacturers showcase an alarming 4% year-on-year decline in domestic auto sales, suggesting persistent weaknesses in demand, compounded by the withdrawal of trade-in subsidies in certain regions. As sentiment in the market reflects an increasing reluctance to spend, one salesperson aptly summarized, “Who still has money these days? People’s pockets are cleaner than their faces,” highlighting the financial strain on consumers and the overall automotive market.
