HONG KONG — A significant shift in consumer preferences is underway in China, as the allure of foreign luxury cars appears to be fading. Increasingly, customers are gravitating toward more affordable domestic brands, often enticed by substantial discounts. This emerging trend poses challenges for prominent European car manufacturers like Porsche, Aston Martin, Mercedes-Benz, and BMW, who have historically commanded the upper tiers of the world’s largest automotive market.
The backdrop of a slowing Chinese economy, coupled with a protracted downturn in the property sector, has left many consumers hesitant to indulge in major purchases. This economic climate has also tempered the willingness of affluent individuals to showcase their wealth through high-end vehicle purchases, according to Paul Gong, head of China Automotive Industry Research at UBS.
Leveraging government incentives, such as a trade-in subsidy of 20,000 yuan ($2,830) for electric and plug-in hybrid vehicles, many consumers are opting for entry-level cars, where the financial benefits are more pronounced. These cars are predominantly manufactured by Chinese companies. “Slowing economic growth is one key driver behind weaker demand for premium cars,” remarked Claire Yuan, director of corporate ratings for China autos at S&P Global Ratings.
The market dynamics, which had seen the share of premium car sales—typically priced above 300,000 yuan ($42,400)—more than double from 2017 to 2023, are now in reverse. According to S&P, the proportion of premium car sales has decreased from 14% in 2024 to 13% in the first nine months of 2025.
In contrast to the luxury vehicles’ declining sales, Chinese automakers are capitalizing on their growing market presence and aggressive approach to innovation. Companies like BYD are introducing new electric and hybrid models at competitive prices, making them appealing alternatives to foreign luxury brands. Yuan noted, “Their products are more competitive and more affordable even in the premium segment. That’s why these foreign brands are gradually losing momentum.”
The impact of these trends is evident, with Chinese brands capturing nearly 70% of passenger car sales in the first 11 months of this year. In comparison, German brands accounted for just 12%, Japanese brands approximately 10%, and U.S. brands around 6%. BYD has notably surpassed Volkswagen to become the leading car seller in China. The company has also reduced prices for its electric and hybrid models by as much as 34%, intensifying competition among rivals such as Geely and Leapmotor.
Luxury carmakers are feeling the financial pinch. Mercedes-Benz reported a 27% drop in unit sales in China from the previous year for the July-September quarter. Similarly, BMW, including its Mini brand, saw an 11.2% decline in sales year-on-year for the first nine months of 2025. Both Porsche and Aston Martin have acknowledged facing struggles stemming from reduced demand. Ferrari, another luxury stalwart, registered a 13% decrease in shipments to mainland China, Hong Kong, and Taiwan from January to September, marking the only region where its sales diminished.
The competitive landscape remains tense, as underscored by Mercedes-Benz CEO Ola Källenius, who indicated that “hyper-competition in China is not going away anytime soon.” The sentiment is echoed across luxury car dealerships, where the downturn in sales is impacting used luxury vehicle prices. A Beijing Porsche salesperson shared that a used 2024 Panamera, initially priced at around 1.4 million yuan ($198,454), is now selling for 950,000 yuan ($134,300) due to sluggish economic conditions. This trend of depreciating values for luxury vehicles is not confined to Porsche; brands such as Bentley, BMW, and Rolls-Royce are facing similar challenges.
While China’s monthly auto production reached a record high of 3.5 million units in November, overall domestic auto sales have declined by 4% year-on-year amid waning demand and the cessation of certain trade-in subsidies in various regions. Amid this environment, a used car salesperson reflected on the current market sentiment, humorously noting that consumers seem to be more cautious with their spending, stating, “Who still has money these days? People’s pockets are cleaner than their faces.”
