Summary of Key Points
In the first half of the year, sales of both joint-venture brands such as Toyota and Volkswagen, as well as luxury brands like BMW and Porsche, declined by double digits in the Chinese market (with declines ranging from 17% to 35%). This phenomenon is the result of a combination of factors, including the rise of domestically produced new energy vehicles, lack of consumer confidence, and the slow transformation of foreign brands.
Detailed Analysis
1. Domestically produced new energy vehicles are competing fiercely, eroding the market share of foreign fuel vehicles
In recent years, domestically produced new energy vehicles have emerged as a “dark horse,” directly taking market share from foreign brands. Brands like BYD and Aion offer pure electric vehicles with a range of over 400 kilometers, smart displays, and assisted driving features for around 100,000 yuan, providing excellent value for money. In contrast, joint-venture brands, which previously relied on fuel vehicles for their success, are either late in launching new energy models (with very few electric models from Toyota) or their products fall short in terms of functionality (for example, the smart features of Volkswagen’s ID series are not as advanced as those of domestic new players). Consumers find that buying a domestic new energy vehicle not only saves more money on fuel costs but also comes with more advanced features, leading them to prefer these options over foreign fuel vehicles.
2. Consumers are more cautious with their spending
The economy is still in the recovery phase, and many people have unstable incomes, facing significant pressures from mortgage payments, rent, and daily expenses. Buying a car is a major expense, so people are more hesitant to make such a purchase. This is especially true for luxury brands; for instance, Porsche’s sales declined by 32% and BMW’s by 20% in the first half of the year. Even wealthy individuals are reducing non-essential luxury purchases. Ordinary families are even more cautious, and those who planned to buy a new car may choose to keep using their current vehicles for now.
3. Foreign brands are lagging in their transformation to new energy
Foreign brands were the leaders in the fuel vehicle era, but they have been slow to adapt to the new energy trend. For example, Mercedes-Benz’s EQ series of electric vehicles is more expensive than BYD’s Han by over 100,000 yuan, yet its range and smart features are comparable. Audi’s electric models still have a design that reflects the old fuel vehicle era and fail to attract younger consumers. In contrast, domestic new players release new models annually, with faster updates and features that better meet the needs of Chinese consumers (such as remote car control and voice-activated assistance systems). The slow pace of foreign brands has left them behind in the new energy market.
4. Young people prefer new energy vehicles
Young people are increasingly turning to new energy vehicles when considering car purchases. On one hand, the operating costs of new energy vehicles are much lower (a few cents per kilometer compared to the few cents per kilometer for fuel vehicles). On the other hand, smart features are more appealing to them, such as voice-controlled air conditioning, automatic parking, and in-car entertainment. Joint-venture brands’ fuel vehicles, with their small central control screens and limited smart features (even without standard CarPlay support), are seen as outdated by younger consumers. For example, GAC Honda only sold 68,000 vehicles in the first half of the year, with the majority being fuel vehicles, indicating that young consumers are no longer interested in these brands.
These factors combined have led to a collective decline in sales for foreign brands in the first half of the year. In short, domestically produced new energy vehicles are too competitive, foreign brands have failed to keep up, and consumers either don’t have the money or are unwilling to buy fuel vehicles—resulting in poor sales for these brands.