The Chinese automobile market has been the largest in the world since 2010. Automobile brands from around the world have taken advantage of this decade and a half to cement their income statements there, selling cars with technology already amortized in many cases. Things have changed and little by little that crucial part of your business is being eroded.
Last week the global sales figures by the major German car manufacturers. The Chinese share continues to shrink and it also seems to be increasingly accelerated. The managers of Volkswagen, BMW and Mercedes are looking for a way to stop the decline in the largest automobile market on the planet.
As we tell you in this video, until recently foreign cars, especially German ones, were the most desired and dominated the Chinese market. Germany’s three big automakers (and many of their suppliers) built their bottom line in a market… in which they are losing ground.
Let’s analyze the data from German manufacturers and see the reasons why they have occurred.
- VW Group: In the first nine months of 2024, the VW Group’s global new car deliveries fell by 2.8% to 6.5 million vehicles. The biggest decline was in China, which accounts for 32% of total global sales. In the Asian country, the combined sales of brands such as Volkswagen, Porsche, Audi or Bentley, fell 10% in that period of time. In fact, excluding China, Volkswagen Group sales in the rest of the world grew by 1%.
- bmw: The worst unemployed, since in the first three quarters of the year the sales of BMW and Mini in China fell 13%. This market represents around 30% of the Group’s registrations worldwide.
- Mercedes-Benz: Its global sales are slowing down… «mainly in Asia, since sales in China fell 13% in the third quarter of the year.
What do German brands say?
“The competitive situation in China is particularly intense, which is the main reason for the global drop in our deliveries,” said Marco Schubert, head of sales at the VW Group, in a statement on October 11.
BMW expects a “slight decrease in deliveries” worldwide (previously forecasting a slight increase) and cut its profit outlook due to the “continued decline in demand in China.” It acknowledged delays in deliveries around the world due to problems with the braking systems in some vehicles.
For its part, Mercedes-Benz attributes its woes to the worse macroeconomic conditions, which lead to “lower overall consumption, especially of luxury goods.” Also to the continuous discounts, mainly in the electric vehicle segment, which affected sales in China,” the brand says in a statement.
The four problems
This perfect storm has been brewing from several fronts:
- Rise of China’s national brands: In the first half of the year, foreign brands represented 43% of new car sales in China, compared to 50.5% a year ago (according to data from the China Passenger Car Association). Some will say that subsidies for national brands help them gain market share… but ultimately the key is competitive cost structures and chinese speed: They are much faster at getting vehicles from the drawing board to the showroom.
- More share of electric vehicles: Electric cars account for more than half of new car sales in China. Foreign manufacturers simply cannot keep up with the technological pace of the new players, who have a huge product portfolio to the point of having overproduction… which is sent to Europe, of course.
- China’s economic slowdown: With lower growth in the country, consumer demand has decreased. That has led to a price war on cars, increasing pressure on Western automakers.
- Uncertainty over European Union tariffs: Europe has increased the pressure by imposing tariffs on electric vehicles made in China. Most of the industry disagrees, as it remains to be seen how China responds, but it will surely in some way complicate the industry’s ability to compete there. And it remains to be seen what happens in the US elections… since a second term for Donald Trump could lead to greater economic confrontation.
There are some factors, as you see, that are outside the control of the manufacturers. But it is also true that the rapid growth of electric vehicles and the capabilities of local producers have been underestimated.
The Volkswagen Group announces 30 100% electric models in China by 2030. At the end of this year, the Audi Q6L e-tron will arrive, based on the Premium Electric Platform (PPE) and which they will manufacture together with FAW. In 2025 another five, made by Volkswagen with Xpeng and Audi with SAIC… in addition to another four more compact ones. Mercedes also announced last week that it is working to improve its product offering in China, which will be known in a year.
