China’s automakers have a message for premium German brands Porsche, Mercedes, and BMW: We’re coming for your customers. After years of producing the world’s most technologically advanced, low-cost electric vehicles, Chinese companies like Geely and Nio are now launching premium models. These vehicles are packed with features and priced significantly lower than German rivals. Therefore, Chinese automakers premium brands are now a direct threat to established European names.
This represents a major change for an industry that spent the last three years in a bitter electric vehicle price war. It poses a huge threat to legacy premium automakers both in China, the world’s largest auto market, and abroad. “The price war has turned into a value-for-money war,” said Bo Yu, Greater China country manager at research firm JATO Dynamics. At this year’s Beijing Auto Show, which kicks off on Friday, the industry will debut 181 models and 71 concept cars. This includes a “flood” of big, premium “9-series” SUVs, according to Cui Dongshu, secretary-general of the China Passenger Car Association.
German Automakers Face Declining Sales in China
The fight for the premium market spells further trouble for German automakers in China. According to data from S&P Global Mobility, German automakers’ cumulative sales in China fell nearly 25% to 3.85 million vehicles from 5.1 million in 2019. Mercedes-Benz, BMW, and Volkswagen units Porsche and Audi all posted sales declines in China in the first quarter. Therefore, Chinese automakers premium brands are gaining ground at the expense of German competitors.
The upmarket push will also intensify competition overseas. Chinese automakers are increasingly looking to go abroad after the price war left the domestic market flooded with cars. China’s EV makers have absorbed European Union tariffs on Chinese-made electric cars. They keep them priced below similar models from European rivals. Chinese hybrids and combustion-engine cars are not subject to EU duties.
Zeekr Unveils 8X SUV to Challenge German Premium Models
Geely’s premium brand Zeekr last week unveiled the 8X. This full-size, long-range plug-in hybrid SUV comes laden with safety, infotainment, and tech features. The 8X can tilt upward before a side collision to protect passengers. If the car parks in a tight spot, the driver can wave at it. The car will then drive itself out of the space to allow easy access for passengers.
Geely showed a video of the 8X, which starts at under $53,000, defeating both the Porsche Cayenne and the BMW 5M in speed trials. These German premium models start at around $135,000 and $205,000 respectively. “This is the new king of the road,” Geely Automobile CEO Gan Jiayue told the audience at an event in Ningbo. The Chinese automakers premium brands push thus directly targets the performance reputation of German engineering.
Detroit Automakers Also at Risk
Tu Le, managing director of consultancy Sino Auto Insights, said that by launching large premium SUVs, Chinese automakers are sending “a shot across the bow” of Detroit automakers General Motors, Ford Motor, and Stellantis. These companies have specialized in highly profitable large SUVs and trucks. At the moment, U.S. customers cannot buy Chinese cars. However, many industry watchers expect that to change eventually. “Detroit’s cash cow is no longer safe,” he said.
The rise of Chinese premium cars comes as consumer demographics and tastes have shifted. CPCA’s Cui said the average Chinese car buyer’s age has increased to greater than 40 from 30. Families want larger premium models, leading to falling demand for entry-level cars. Chinese consumers are also increasingly drawn to the industry-leading technology of China’s EV makers. Younger buyers have no interest in the heritage that is German premium brands’ key strength in Europe, JATO Dynamics’ Bo said.
“German brands are stuck in the past,” she said. “But Chinese consumers want to embrace the future.” Auto consultant Felipe Munoz said that while it was “unthinkable five years ago” that Chinese consumers would prefer premium local models over established German rivals, “foreign luxury and premium brands are now going to find it harder to survive in China.”
“The question is whether this will be the case outside China,” he said. “In Europe, German premium brands are a reference of quality. That’s going to be hard to change,” Munoz added. Nevertheless, Chinese automakers premium brands are already expanding in Europe. BYD, Nio, and Geely have launched models in several European countries. Their combination of advanced technology and competitive pricing appeals to cost-conscious buyers. German automakers are responding with their own EV investments. However, they struggle to match Chinese production costs and speed to market. The Beijing Auto Show will showcase just how far Chinese automakers have come. Their premium brands are no longer copying Western designs. They are setting their own trends. The global automotive landscape is shifting. Chinese automakers premium brands are leading the charge.
