MMore than 40 years have passed since Volkswagen stole the show at its first Chinese auto fair. Today, it has lost its cutting-edge status in the country. Homegrown brands now set the pace for younger, tech-hungry drivers. The combustion-engine heritage of “Made in Germany” no longer holds much sway in China. Local automakers now roll out flashy, affordable electric vehicles. These are essentially mobile phones on wheels. Therefore, the German carmakers China decline has been dramatic.
“Maybe some younger customers perceive us as the brand for the parents,” said Volkswagen brand’s China CEO, Robert Cisek. He spoke to Reuters. Blindsided by the meteoric rise of Chinese brands, sales at Volkswagen have tumbled. Sales at its Porsche and Audi units have also fallen. Rivals BMW and Mercedes-Benz have suffered similar declines. They are scrambling to staunch the bleeding in a market that once accounted for a third of their sales. Volkswagen spent 25 years as China’s No. 1 automaker. BYD overtook it in 2024. Geely knocked Volkswagen into third place in 2025.
From Market Pioneers to EV Laggards
Volkswagen attended its first Chinese auto show in Shanghai in 1985. Locals were impressed by the quality of the German automaker’s marketing materials. “We were met by an unimaginably huge crowd,” then-CEO Carl Hahn wrote in his memoirs. “Our brochures flew off the shelves.” He added: “For people at that time, it was enough simply to marvel at the quality of the paper and print and to dream about owning a car.” Now, the German auto group needs more than glossy paper. It must stage a comeback at this year’s Beijing Auto Show, which kicks off on Friday.
German automakers dominated combustion-engine car production for decades. Now they find themselves racing to catch up in China. More than one in four new cars in China is fully electric. Local brands launched a plethora of consumer-friendly EVs. German carmakers lost ground as a result. Their collective sales fell by a quarter over five years. They sold 3.9 million vehicles in 2025, according to S&P Global Mobility data. The German carmakers China decline has accelerated this year. Chinese brands are now making inroads in the premium segment.
German car executives sit thousands of miles away in their headquarters. They are in Wolfsburg, Stuttgart, and Munich,underestimated Chinese automakers’ ability to dominate EV development. “They didn’t see this big change coming,” said automotive consultant Felipe Munoz, didn’t see the speed at which it came.” Germany’s legacy automakers must turn their China businesses around. Otherwise, they will lose relevance in a crucial market. Volkswagen CEO Oliver Blume views China as a training ground. He wants to build the cars of the future there.
Volkswagen Plans 20 New Energy Vehicle Launches
Under CEO Blume, Volkswagen Group plans 20 “new energy vehicle” launches in China this year. These include all-electric models and plug-in hybrids. They also include EVs with small combustion engines known as range extenders. The company will premiere four new EVs in Beijing on Tuesday. These will debut ahead of the car show’s opening. They include mass-market hopefuls developed with Chinese partners FAW and EV maker Xpeng. Volkswagen will also showcase the latest China-only AUDI. This new brand replaces the premium marque’s famous rings with an all-caps name. It was jointly developed with China’s SAIC.
Yale Zhang is managing director at Shanghai-based research firm Automotive Foresight. He said German brands are being “murdered” by their own legacy. They also resist rapid change. “You can’t really rely on your chrome metal strips,” Zhang said. “Your Napa leather seats won’t convince consumers either. Your ‘one-hundred-year’ history is not enough.” German automakers have sometimes resisted technology from Chinese rivals. Now, Volkswagen, Mercedes, and BMW are leaning on Chinese suppliers to catch up. These include autonomous driving leader Momenta. They also include in-car software developer ECARX.
The Burden of Legacy
“Made in Germany” remains an internationally trusted hallmark. However, young consumers are more likely to avoid German cars. This includes young consumers in China. A consumer survey by Berylls by AlixPartners in January revealed this trend. “The good thing is, of course, there is this credibility,” Cisek said. “Volkswagen has safety, reliability and quality.” He added: “At the same time, it’s also a little bit of a burden.” The German carmakers China decline reflects both market forces and brand perception challenges.
The transformation of China’s auto market has been “beyond imagination,” Cisek said. These companies once saw China as a growth driver. Now it has become a battleground. German automakers once enjoyed premium positioning. They had pricing power. Chinese consumers associated German engineering with quality and status. Now local brands offer superior technology at lower prices. Younger Chinese drivers grew up with smartphones. They expect their cars to function as smart devices. German carmakers are playing catch-up in software and autonomous driving. They also lag in battery technology. The Beijing Auto Show will reveal whether their new models can reverse the German carmakers China decline. For now, the parents’ generation may still buy Volkswagens. Their children are buying BYD, Geely, and Nio.
