Frankfurt (Germany) (AFP) – Long a goose that lays the golden eggs for German car manufacturers, China has become a formidable competitor, capable of threatening their positions even in their domestic market.
Published on: 06/11/2026 - 10:24
“Until shortly after 2020, German car manufacturers derived their profits from China. It is now over,” assures automobile expert Ferdinand Dudenhöffer in his book to be published on November 17, “The new automotive superpower”.
Between 2019 and 2025, cumulative sales in China of Volkswagen, Mercedes-Benz and BMW fell by almost a third, from around 5.65 million to 3.87 million vehicles, according to AFP calculations based on figures communicated by the companies.
At the same time, the market share of local manufacturers in China increased from 37.8% to 65.3%, according to the China Federation of Personal Car Manufacturers (CPCA).
This loss of ground in the world's largest automobile market weighs heavily on the entire German industry, from manufacturers to equipment suppliers like Bosch, ZF or Continental.
Volkswagen, which brings together ten brands including VW, Audi, Porsche, Skoda and Seat, recorded a net loss of 5.8 billion euros between July and September, largely linked to its difficulties in China.
Car twice as expensive
For many observers, German manufacturers were slow to appreciate the transformation of the Chinese market.
"It came from an elitist attitude, from an idea like 'Oh, we're better'. It was hard to believe that others could do things differently and better," a former head of strategy at Mercedes-Benz told AFP.
The error did not only concern the rise of local brands like BYD, Geely or Xpeng. The German groups also underestimated the speed at which electricity would redistribute the cards.
In October, 67.8% of vehicles sold in China were electric or hybrid according to the CPCA.
Lower production costs and overwhelming dominance in batteries, the most valuable component of an electric vehicle: Chinese manufacturers have managed to offer competitive models at prices inaccessible to European rivals.
According to Dudenhöffer, an Audi E5 Sportback sedan produced in China for the local market costs half as much as a comparable model made in Germany.
But competition is no longer just about costs.
Behind these vehicles full of electronics and digital functions meeting the expectations of Chinese consumers are now technological giants like Huawei or Xiaomi.
“The car of the future is being designed in China, and not in Wolfsburg, Ingolstadt, Stuttgart or Detroit. Today, we are the ones learning from the Chinese – and not the other way around,” notes Mr. Dudenhöffer.
Increased dependence
Aware of their delay, German manufacturers have increased their partnerships in China. Volkswagen has notably joined forces with Xpeng to accelerate the development of software and digital features to capture local customers.
But the current situation also illustrates the risks of excessive dependence.
“The considerable importance of China on the market has always been double-edged and risky for German manufacturers,” Stefan Bratzel, sector expert at the Center of Automotive Management in Germany, told AFP.
The consequences are already being felt across the entire German automotive industry. In addition to Volkswagen, equipment manufacturers like Bosch, Continental and ZF have launched restructuring and savings programs in recent months.
However, no German manufacturer is considering withdrawing from China.
Volkswagen plans to make greater use of its Chinese industrial capacities to export 300,000 vehicles each year to other markets in Asia, the Middle East and South America.
"We don't see China as a market where we can say 'Oh, it's going to disappear, let's focus on something else'," Mercedes-Benz CEO Ola Källenius assured in October.
“When you are a global car manufacturer like Mercedes, it is not possible to put China aside.”
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© 2026 AFP
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