Demand for foreign luxury cars in China declined sharply in 2025 as consumers increasingly favored lower-priced domestic vehicles equipped with advanced digital systems, industry data showed. The shift occurred as slower economic growth and a prolonged property slump reduced willingness to make high-cost purchases. Premium European automakers, including Mercedes-Benz, BMW, and Porsche, recorded falling sales volumes as Chinese brands expanded offerings that better matched local expectations. Analysts described the downturn as a fundamental change in consumer behavior rather than a short-lived reaction, signaling a broader transformation within the world’s largest automotive market.

The trend has been reinforced by government trade-in incentives for electric and plug-in hybrid vehicles, which encouraged buyers to focus on models where subsidies produced greater savings. Chinese manufacturers adopted an adaptive approach, rapidly updating product lines and pricing strategies to maintain appeal. Market observers noted that this created a persistent challenge for foreign brands whose higher production costs limited flexibility. At the same time, affluent consumers showed growing restraint in displaying luxury goods publicly, further weakening demand. Industry analysts emphasized that foreign automakers now face an overarching need to reassess localization, branding, and long-term investment strategies in China. Without significant adjustments, experts warned that overseas brands risk continued erosion of market share as domestic competitors strengthen positions across both mainstream and premium segments nationwide.