German Luxury Car Makers Are Falling Hard in China

China is gradually becoming a slaughterhouse for German luxury carmakers. After decades of riding the gravy train, the legacy premium brands face a harsh new reality. Porsche, Mercedes, and BMW all had a rough 2024. To make matters worse, the start of this year has been even more brutal. The posh trio saw double-digit declines in the first quarter, with Zuffenhausen taking the hardest hit by far.

As a refresher, Porsche plummeted by 28 percent to 56,887 cars in 2024 versus the year before. In Q1 2025, deliveries decreased by a worrying 42 percent versus the January-March 2024 interval. During the first three months of the year, the company sold only 9,471 cars in China. Why? Porsche blames “the continuing tense economic situation in the Chinese market and its focus on value-oriented sales, which aims to balance demand and supply.”

But Porsche isn’t an exception. Mercedes fell 7 percent in 2024 to 683,600 cars. In Q1 2025, shipments to Chinese customers decreased 10 percent to 152,800 vehicles. Despite the significant fall, the three-pointed star sees the glass half full. It was the best-selling brand for cars priced at over RMB 1 million ($136,000). Additionally, it hopes the launch of the new CLA in the second half of the year to move the needle.

Lest we forget that Mercedes has a handful of regional models with a longer wheelbase. Chinese buyers continue to have a soft spot for an abundance of rear legroom, which is why the A-Class, C-Class, and E-Class have been stretched specifically for the local market. Mercedes still isn’t in great shape despite these efforts to better cater to local customer preferences.

It’s a similar story at the BMW Group. Deliveries of BMWs and Minis decreased 13.4 percent to 715,200 cars, and the January-March 2025 interval is even worse. The two brands suffered a 17.2-percent drop to 155,195 cars. In the first quarter of the year, the core BMW brand grew in all regions except for China, which continues to be its largest market.

Like Mercedes, BMW offers several stretched sedans and even long-wheelbase derivatives of the X1, X3, and X5 SUVs. China is also the only country where the company sells the i3. No, not the oddball small hatchback, but a fully electric sedan based on the elongated 3 Series manufactured at one of its Chinese factories.

Audi has yet to publish sales figures for Q1, but we won’t be surprised if they don’t look good. In 2024, the Four Rings were down by 10.9 percent to 649,900 units in China and Hong Kong because of an “intensely competitive market.” Indeed, domestic rivals are finally catching up in design and technology. They might lack the aura of long-running prestige brands, but the latest high-end cars are significantly cheaper.

The EV boom has caught Western car brands off guard, and now they’re the ones playing catch-up. However, it’s easier said than done, as Chinese brands have an edge in a few critical areas. For one, they have access to raw battery materials for EVs, giving them a significant advantage in production costs. Additionally, the far lower labor costs in China allow these brands to offer competitive pricing, making it even more challenging for Western automakers to keep up.

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Source: Audi

Unusual efforts to fend off increasingly stronger competition from domestic automakers include the launch of sub-brands such as Volkswagen’s Jetta and Audi’s confusingly named AUDI.

Elsewhere, job cuts announced by Mercedes, Porsche, and Audi are a clear indication of the difficult road ahead for traditional luxury automakers. These legacy brands are trying to position themselves for the future.