China luxury sales are falling as economic pressure reshapes buyer behavior in the world’s largest auto market. This shift now challenges European automakers that once dominated the premium segment.
Chinese consumers increasingly choose domestic brands that offer advanced technology at lower prices. As a result, demand for imported luxury vehicles continues to decline across major cities.
Economic uncertainty plays a central role in this trend. In particular, the prolonged property downturn has weakened consumer confidence. Consequently, buyers delay large purchases such as premium vehicles.
Moreover, affluent consumers increasingly avoid visible displays of wealth. Therefore, interest in luxury brands has softened even among high-income households.
European automakers feel the impact most strongly. Brands such as Mercedes-Benz, BMW, Porsche, and Aston Martin report notable sales declines.
At the same time, government incentives influence purchasing behavior. For example, buyers receive trade-in subsidies for electric and hybrid vehicles.
However, these subsidies favor lower-priced models. As a result, consumers often select affordable Chinese electric vehicles instead. Industry analysts cite slowing economic growth as a key driver. Additionally, cautious sentiment continues to weigh on premium demand.
Between 2017 and 2023, premium vehicles expanded their market share rapidly. Nevertheless, that trend has now reversed. Premium car share fell from about 15 percent in 2023 to 13 percent in 2025. Consequently, luxury brands have lost momentum.
Meanwhile, Chinese automakers accelerated innovation across product lines. Companies like BYD frequently introduced new electric and hybrid models. Furthermore, domestic brands emphasized smart features and comfort. Therefore, they aligned closely with evolving consumer preferences.
Chinese brands captured nearly 70 percent of passenger car sales this year. In contrast, German brands held roughly 12 percent of the market. Japanese and American brands trailed further behind. As a result, domestic producers strengthened their market dominance.
BYD surpassed Volkswagen as China’s top-selling automaker. Additionally, it cut prices aggressively across multiple models. These discounts intensified competition across all segments. Consequently, profit margins narrowed for both domestic and foreign brands.
European automakers reported sharp quarterly declines. Mercedes-Benz unit sales dropped more than 25 percent year-on-year in China. BMW and its Mini brand also posted double-digit declines. Similarly, Ferrari shipments fell across Greater China.
Dealerships now face growing pressure. For instance, used luxury vehicle prices dropped sharply over the past year. Sales staff report slower turnover and deeper discounts. As a result, resale values for premium cars continue falling.
Despite record vehicle production, domestic auto sales softened. Trade-in subsidy suspensions worsened demand in several regions. Executives acknowledge intense competition will persist. Therefore, foreign automakers must adapt strategies to remain competitive.
Looking ahead, analysts expect continued pressure on luxury demand. Meanwhile, Chinese brands plan deeper expansion into premium segments. China luxury sales illustrate broader economic adjustment. Consequently, the auto industry faces a prolonged period of restructuring.
