Foreign automakers in China face an increasingly urgent challenge at this year's Shanghai auto show – winning back Chinese buyers while their domestic rivals churn out slick, affordable electric vehicles at a relentless pace.
The world's largest automakers have steadily lost market share in recent years as sales of Chinese brands have soared. The destruction of legacy-brand equity is spreading fast from low- and mid-priced segments to luxury automakers now struggling to match Chinese rivals with superior EV drivetrains and a dizzying array of high-tech interior features.
Germany's Porsche – among the world's most powerful premium brands for decades – has become the new poster child for the decline of legacy automakers in China. Its sales in the country plunged 42% in the first quarter, an acceleration of previous losses since the legendary sports-car maker hit record China annual sales of 95,671 just four years ago – nearly a third of its 2021 global total.
Unlike other Volkswagen Group brands, VW and Audi, which showcased five new electric models at the Shanghai show, Porsche retreated to its combustion-engine heritage. The automaker unveiled two limited-edition variants of its 911 in a display surrounded by vintage examples of the legendary sports car. A lighted sign read: "There is no substitute."
Chinese customers aren't buying it. Instead, they are buying increasingly futuristic luxury and sports substitutes from domestic competitors, including BYD's Yangwang brand and Xiaomi, an electronics and appliances giant that only entered the car business last year. Xiaomi's first car, the electric SU7 sport sedan, caused a sensation with Porsche-inspired styling at a much lower price.
When Xiaomi introduced an absurdly fast, 1,548-horsepower SU7 Ultra variant in February priced from 529,900 yuan ($72,591), it said it had racked up about 10,000 pre-orders in two hours, slightly more than the first-quarter sales of all Porsche models in China. The least expensive Porsche 911, which sells for 1.468 million yuan, or approximately $201,170, in China, has 394 horsepower, according to Porsche's website.
"Porsche is done" in China, said Tu Le, founder of consultancy Sino Auto Insights.
Porsche is hardly alone among foreign automakers in losing sales to Chinese rivals, which in many cases are not yet profitable.
Foreign automakers "understand the challenge," said Yu Zhang, managing director of Shanghai-based consultancy Automotive Foresight. "But they're still not moving fast enough to solve it."
In September 2022, investor faith in Porsche's storied brand was so strong that, shortly after its initial public offering, its value soared past its vastly larger parent Volkswagen.
The automaker's shares are now down 44% from its stock market debut and 21% year-to-date. Porsche's sales in China have declined for three consecutive years.
Volkswagen and Porsche CEO Oliver Blume dismissed concerns about declining Porsche sales in China as he addressed reporters on Tuesday, following the unveiling of VW and Audi models ahead of the Shanghai show.
"We don't care about the volume," Blume said, adding he was more concerned about keeping prices high – at a level "appropriate for Porsche."
Blume denied that Porsche competes directly with Chinese brands such as Xiaomi and Yangwang: "They are cool cars," he said, but they lack Porsche's "driving ability" and play in a "lower pricing segment."
Blume said the company might abandon the EV segment entirely in China, where more than half of the new cars sold are now electric vehicles (EVs) and hybrids. Porsche sells two EVs here, the Taycan and Macan. It does not report specific model sales by country, but Blume said Porsche's EV sales in China were "relatively low."
"We will see in the next two to three years whether Porsche exists as an electric brand here," he said.
The core attributes that have historically made a Porsche a Porsche – the throaty roar of a 911's flat-six-cylinder engine, for instance – don't have the same appeal in China as in other Porsche markets.
"The concept of Porsche as a golden brand means nothing to younger generations in China," said Bo Yu, China country manager at research firm JATO Dynamics.
The Chinese automakers that are increasingly moving into high-end segments do care about sales volumes.
Xiaomi sold 137,000 SU7s last year, more than double Porsche's total full-year China sales of just under 57,000, out of global sales of 310,718. Last month, Xiaomi increased its vehicle sales target for 2025 to 350,000.
Small premium Chinese electric vehicle (EV) maker Nio saw sales rise 38.7% last year to 221,970 vehicles. CEO William Li said Nio expects to double its volume this year – calling it a "harvest year" – as it introduces nine new or updated electric vehicle models.
The rapid growth of China's industry has translated directly to steep sales declines for foreign automakers across all segments.
"They won't get that market share back," said Andrew Fellows, global head of automotive and mobility at technology consultancy Star.
Some are nonetheless fighting to remain relevant in China. Financially troubled Nissan announced at the show that it will invest an additional $1.4 billion in China and launch 10 new vehicles in the coming years to reverse its sales decline.
"The Chinese brands were too fast, to be honest," in releasing compelling models, said Nissan China chief Stephen Ma. "Now, I think we have reset."
General Motors is also rebooting after recording $5 billion in charges on its China operations in December. Its comeback efforts hinge largely on its premium Cadillac brand, which displayed four all-electric models at the Shanghai event.
Buick's GL8 has been one bright spot for GM in China. It remains a leader in China's multi-purpose vehicle (MPV) segment, more commonly referred to as minivans in the U.S.
MPVs are prized by Chinese consumers as both family haulers and chauffeured luxury vehicles for executives.
Buick displayed a new concept GL8, which brand design executive Matt Noone said will come only in EV or hybrid variants and be loaded with interior technology to counter Chinese competitors, including reclining and massaging seats, as well as a "fragrance system."
Buick aims to counter MPV competitors from BYD's Denza brand, Li Auto and Xpeng, which launched a redesigned X9 MPV featuring a built-in refrigerator ahead of the Shanghai show.
Geely's Zeekr has just launched the 009 Grand, a four-seater MPV that also features a fridge, along with a 43-inch (109 centimeter) wide TV and 24-karat gold Zeekr logos, because, as one spokesperson put it, "the Chinese love gold."
"We're under attack here," Buick's Noone said. "We need to maintain our GL8 dominance before it’s taken from us."
"And it's a race against the clock.”
