Lead: Demand for imported luxury cars in China has weakened in 2024–2025 as the country’s slower economic growth, a prolonged property slump and shifting buyer preferences push consumers toward lower-priced domestic models, often electric or hybrid. The trend — visible across both new and used markets — is reducing market share and sales volumes for established European marques including Mercedes-Benz, BMW, Porsche and Aston Martin. Government trade-in subsidies for new-energy vehicles and aggressive pricing from Chinese makers such as BYD have accelerated the shift. As a result, premium models and their dealers face falling prices and softer demand in the world’s largest auto market.
- Premium segment retreat: Premium cars (typically priced above 300,000 yuan / $42,400) fell from about 15% of total sales in 2023 to about 14% in 2024 and to 13% in the first nine months of 2025, S&P Global reported.
- Domestic brands rising: Chinese automakers captured nearly 70% of passenger car sales in the first 11 months of 2025, while German brands held roughly 12%, Japanese about 10% and U.S. brands roughly 6%, according to CAAM.
- BYD’s competitive push: BYD has become China’s top seller for new-energy vehicles and has cut prices on some EV and PHEV models by up to 34%, intensifying pressure on rivals.
- European declines: Mercedes-Benz unit sales in China fell 27% year-on-year in the July–September quarter; BMW and MINI sales dropped about 11.2% in the first nine months of 2025.
- Used prices plunging: Dealers report steep markdowns in pre-owned luxury inventory — examples include multi-hundred-thousand-yuan differences between original purchase prices and current asking prices for recent models.
- Policy and demand drivers: A 20,000-yuan ($2,830) trade-in subsidy for EVs and PHEVs, plus halted or varied local incentives, has nudged many buyers toward cheaper, domestic models where the subsidy has greater relative impact.
- Production vs. sales mismatch: China’s monthly auto production exceeded 3.5 million units in November 2025 for the first time, while domestic auto sales fell about 4% year-on-year amid softer demand.
Background
China’s automotive market grew rapidly in the 2010s, with premium marques expanding share among affluent buyers. Between 2017 and 2023, the premium segment more than doubled its share to roughly 15%, driven by rising incomes and strong demand for imported luxury models. That expansion made the market a core battleground for European and other foreign brands.
Since 2021–2022, however, China has faced a drawn-out property downturn and slower GDP growth, which have constrained big discretionary purchases. Policymakers and local governments have intermittently offered trade-in subsidies and incentives for new-energy vehicles (NEVs) — electric vehicles and plug-in hybrids — which disproportionately benefit lower-priced domestic models and have reshaped purchase calculus for many consumers.
At the same time, Chinese automakers invested heavily in electrification, software, and cabin technology, allowing some domestic models to compete in categories that were once insulated for foreign brands. The resulting competition has altered brand perceptions and price sensitivity among buyers who increasingly weigh features and value over foreign nameplates.
Main Event
Throughout 2024 and into 2025, European luxury carmakers reported notable declines in China. Mercedes-Benz disclosed a 27% drop in unit sales in China in the July–September quarter year-on-year, while BMW and MINI combined sales fell about 11.2% in the first nine months of 2025. Porsche and Aston Martin also signaled that demand in China was softer than expected.
Dealers across major Chinese cities described shrinking foot traffic for high-end showrooms and heavier discounting on used luxury inventory. A Beijing Porsche dealer reported a nearly 450,000-yuan gap between an earlier purchase price and current asking price for a lightly used Panamera; similar markdowns were observed at Bentley and Rolls‑Royce listings as sellers sought faster turnover.
Industry bodies reported that Chinese brands’ share of passenger car sales rose to almost 70% in the first 11 months of 2025, reflecting gains across entry, mid and increasingly premium segments. BYD in particular has been notable for expanding model ranges and cutting prices on certain EV and PHEV variants by up to 34%, intensifying competitive pressure.
The market has also seen policy shifts: some local trade-in subsidy programs were scaled back or ended in parts of China, producing patchwork incentives that altered demand timing and geography. Meanwhile, overall consumer caution — including reduced conspicuous consumption among affluent buyers — has curbed appetite for very expensive status purchases.
Analysis & Implications
The contraction in luxury-car demand is the product of overlapping economic, social and industrial dynamics rather than a single cause. Slower macro growth and the property slump reduce big-ticket spending across income brackets; the wealthy are reportedly less inclined to overt displays of wealth, which dampens one traditional driver of luxury purchases.
Policy incentives have had an outsized effect. A 20,000-yuan trade-in subsidy is proportionally more valuable for entry-level models than for cars costing several hundred thousand yuan, so buyers seeking the greatest relative subsidy impact are shifting toward lower-priced NEVs that are predominantly domestically produced.
Chinese manufacturers’ rapid product development — shorter model cycles, frequent feature updates and aggressive price moves — have narrowed traditional quality and technology gaps in segments that once favored foreign brands. As domestic models incorporate premium features at lower price points, brand loyalty faces a test: buyers are weighing content and value more heavily than foreign provenance alone.
For European automakers, the near-term implication is softer margins in China as they respond with promotions, refreshed product lines and localized models. Strategically, firms may accelerate electrification, local sourcing and China-specific variants, but that can compress returns and intensify competition with domestic players that already operate on leaner cost structures.
Comparison & Data
| Year / Period | Premium share of total sales |
|---|---|
| 2017 | ~7% (baseline) |
| 2023 | ~15% |
| 2024 | ~14% |
| Jan–Sep 2025 | ~13% |
The table illustrates a peak in premium share through 2023, followed by a modest decline in 2024 and further softening into 2025. Despite record production (monthly output topping 3.5 million units in November 2025), sales have lagged — domestic sales fell about 4% year-on-year — producing inventory pressure and incentives that favor cheaper models.
Reactions & Quotes
Market and company observers offered context and cautions about the durability of the trend.
“Slowing economic growth is one key driver behind weaker demand for premium cars,”
Claire Yuan, Director of Corporate Ratings, S&P Global Ratings
Yuan framed the slowdown as structurally tied to macro and property-sector weaknesses rather than a temporary brand-cycle issue.
“Hyper-competition in China is not going away anytime soon,”
Ola Källenius, CEO, Mercedes-Benz
Källenius’ comment to investors underscores automakers’ recognition that intensified rivalry and rapid model turnover will be persistent challenges in China.
“It’s mainly due to the sluggish economic situation… Now they think hard before they spend,”
Used-car salesperson (Beijing)
Dealers described the market reality on the ground: longer inventory days and steeper discounts for previously stable luxury lines.
Unconfirmed
- Extent of coordinated local policy rollbacks: reports indicate some regions scaled back trade-in programs, but a full, nationwide inventory of policy changes is not confirmed.
- Exact contribution of discreet social shifts: anecdotal evidence suggests reduced ostentation among wealthy buyers, but quantifying its direct impact on luxury car purchases requires targeted consumer surveys.
- Internal pricing strategy plans: automakers’ specific, unreleased margin and price-responsiveness strategies for China have not been independently verified.
Bottom Line
The decline in imported luxury-car demand in China reflects a convergence of macroeconomic slowdown, shifting consumer preferences, government incentives favoring NEVs and a leap-forward by domestic manufacturers on price and technology. For European marques, the market is no longer a protected growth corridor; it is a fiercely contested arena where scale, localization and aggressive product cycles matter increasingly.
Investors and managers should watch subsidy policies, domestic makers’ pricing moves and microeconomic indicators (property-sector health, household balance sheets) for signs of either stabilization or further downside. For consumers and dealers, the short-term outlook points to continued discounting and softer resale values; for manufacturers the strategic imperative is clearer China-focused electrification, cost optimization and product differentiation.
Sources
- Associated Press (news agency) — original reporting and dealer interviews.
- S&P Global Ratings (ratings agency) — premium-segment share analysis and commentary.
- China Association of Automobile Manufacturers (CAAM) (industry association) — sales and production statistics.
- China Passenger Car Association (CPCA) (industry body) — new-energy vehicle and brand ranking data.
- BYD (company) — pricing and product announcements.
- Mercedes-Benz (company) — public earnings commentary and investor statements.