German Auto Giants Stumble as China’s Electric Car Revolution Leaves Them Behind
BEIJING/PARIS – For German automakers, Ryan Xu was the dream customer.The Guangdong entrepreneur and her husband owned a Porsche 911, a Mercedes-Benz G-Wagon, and were among the first to buy a Porsche Taycan, a luxury electric vehicle priced well over $100,000.
But Xu’s view of German cars has soured as Chinese consumers increasingly prioritizetechnological advancements over traditional selling points like horsepower and handling. The 36-year-old mother of three says the Taycan’s software system is terrible and that it’s just an electric Porsche, nothing more.
Xu’s sentiment is not an isolated case. China has long been the largest and most profitable market for Mercedes-Benz, BMW, and Volkswagen, the parent company of Audi. However, as China transitions from the internal combustion engine era toelectric vehicles, these three German luxury automakers have struggled to introduce compelling electric cars in the country, putting their €35 billion (approximately $38 billion) investment at risk.
German Automakers Losing Chinese Customers
Last week, the three German auto giants sounded another alarm bell, reporting declining sales in Chinaduring the third quarter. BMW’s sales plummeted by 30%, marking its biggest drop in over four years, while Mercedes-Benz saw a 13% decline, attributed to weak demand for high-end models like the S-Class and Maybach.
Porsche’s sales fell by 19%, its worst third-quarter performance in a decade, as global demand for the Taycan nearly halved. Meanwhile, Volkswagen’s sales dropped by 15%.
The competitive landscape in China is particularly intense, said Marco Schubert, Volkswagen’s sales chief.
The Price of Complacency
Having dominated the gasoline car era, German manufacturers became complacent, underestimating the threat posed by new competitors. Their reluctance to abandon the lucrative profits of high-displacement engines allowed Chinese domestic manufacturers like Tesla and BYD to gain ground, introducing plug-in vehicles equipped with advanced technology at competitive prices.
Now, the Chinese marketno longer needs or wants them. These German automakers are at a crossroads, said Stephen Dyer, managing director of Shanghai for consulting firm AlixPartners. They need to dramatically change their market strategy.
The Next Challenge: Europe
The next challenge is already unfolding at this week’s Paris Motor Show. Chinesemanufacturers are stepping up their efforts to capture European market share. Companies like BYD and XPeng Motors will showcase their latest technologies at the event, Europe’s largest automotive showcase this year.
Adding insult to injury, Volkswagen, hoping to showcase its future electric vehicles at the Paris Motor Show, experienced a microphone and slidemalfunction during its presentation, visibly frustrating sales and marketing chief Martin Sander.
Frustrated Chinese Car Owners
After experiencing braking and other quality issues, Ryan Xu’s family sold their Porsche Taycan and purchased an ET5 from Chinese brand NIO. They also considered the Mercedes-Benz EQE.
The Chinese brands are much more advanced in terms of technology and user experience, said Xu. They understand the needs of Chinese consumers better.
A Turning Point for the Auto Industry
The struggles of German auto giants in China mark a significant turning point in the global automotive industry. The rise of electric vehicles and theemergence of Chinese manufacturers are forcing established players to adapt or risk being left behind.
As the world transitions to a new era of mobility, the question remains: will German automakers be able to reinvent themselves and regain their dominance, or will they become another casualty of the Chinese electric car revolution?
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