Foreign brands are leaving at dawn: the transformation of the Chinese auto market

The world’s largest automotive market, China, is undergoing a profound transformation that is reshaping the global balance of power in the car industry. Positions once held by traditional manufacturers from Germany and Japan are rapidly weakening, giving way to technologically advanced Chinese brands.

Just ten years ago, companies such as Volkswagen, Toyota, and Honda controlled a significant share of vehicle sales in China. Today, Chinese consumers are increasingly choosing domestic New Energy Vehicles (NEVs), marking a decisive shift in market preferences.

The main driver of this change is electrification combined with evolving consumer expectations. For today’s Chinese car buyer, a vehicle is first and foremost a digital platform – with advanced infotainment, over-the-air updates, and semi-autonomous driving features. In this environment, brands like BYD, Geely, NIO, and Li Auto have proven faster and more flexible than foreign competitors, offering more technologically rich and competitively priced products.

German and Japanese manufacturers have struggled to adapt at the same pace. Their models often lag behind Chinese equivalents in terms of price and technological content. Moreover, the long-standing reliance of Japanese brands on conventional hybrids (HEVs) has become less effective, as Chinese industrial policy increasingly favors fully electric vehicles and plug-in hybrids.

For German brands, the situation is particularly painful. China was once their primary source of profit, but sales volumes are now declining and margins are shrinking. Even the premium segment, traditionally dominated by Mercedes-Benz and BMW, is facing intense competition from Chinese startups offering innovative electric platforms and cutting-edge digital ecosystems.

Industry experts warn that if current trends continue, the market share of foreign brands in China could fall to historic lows. As a result, international manufacturers are being forced to close or repurpose production facilities, while China is rapidly transforming from a key sales market into a global leader in automotive technology and innovation.