"Today, it's us who learn from the Chinese and not the other way around": German automakers can no longer do without China but adopt a double‑edged strategy

Long a goose that lays the golden eggs for German car manufacturers, China has become a formidable competitor, capable of threatening their positions even on their domestic market. “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 calculations based on figures provided 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 have been slow to appreciate the transformation of the Chinese market. "It came from an elitist attitude, like 'we are the best.'

We found it hard to believe that others could do things differently and better,” explains a former head of strategy at Mercedes-Benz. 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 electric would redistribute the cards.

In October 2026, 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 Ferdinand 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, not in Wolfsburg, Ingolstadt, Stuttgart or Detroit.

Today, it's us who are learning from the Chinese - and not the other way around," notes Ferdinand Dudenhöffer. "Double-edged" dependence Aware of their delay, German manufacturers have increased partnerships in China. Volkswagen has notably joined forces with Xpeng in order to accelerate the development of software and digital features to capture local customers.

Machine-translated from French