Global car makers suffer punishing year in China – with more to come

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7 mins read

25 February 2025

Aston Martin CEO Adrian Hallmark recalled the disbelief from seasoned luxury car dealers at the speed of the sales collapse in China. “You sit around the table with them and they’re saying ‘what is this?’. They’ve never experienced a recession; it has been constant growth for 25 years.”

Global car makers, from boutique luxury brands like Aston Martin and Porsche all the way to global giants like Volkswagen, Nissan and Honda, are all seeing sales plummet in China. The country has long been a reliable cash machine for them. Now it isn’t, and the pain is being felt at every level.

Outwardly, the Chinese car market looks normal, with sales up 5.5% last year at 22.9 million. Scratch the surface, however, and the turmoil is revealed.

Firstly, the share of Chinese car makers is growing all the time, up to 60.5% last year from 41% in 2021, according to figures from the China Passenger Car Association (CPCA).

This year will be no different, according to global automotive technology supplier Aptiv, which has seen the future via its order book in the country.

“The signs are that the global, multinational, traditional OEMs will continue to lose a fairly significant share,” CEO Kevin Clark said on its most recent earnings call.

That was proven this January, when Chinese car makers' share of the Chinese market rose to 61.1%.

Most visibly, this hurts the global manufacturers that used to supply the bulk of China's affordable cars and now have to compete against ever stronger local players.

Neatly illustrating that dynamic is the fact that Volkswagen last year lost its long-held best-seller crown to BYD.

Split out by car maker country of origin, the Germans saw their share last year fall to 17% after sales fell 9% to four million. Back in 2021, the Volkswagen Group, BMW and Mercedes-Benz had a combined share of 22%.

The Japanese fared even worse last year, their share shrinking to 13.7% of the market after a steep 15% fall to 3.1m. The likes of Toyota, Nissan and Honda had an even larger share than the Germans back in 2021, at 23%.

The Americans suffered a more lousy year still, with sales down 18% to 1.4 million, giving General Motors and Ford a share of 6.1%, down from nearly 10% in 2021.

Global car makers have had to shrink operations to fit the new reality.

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GM said it had booked a $4.1bn write-down on its China operations for its 2024 accounts, half of which was the cost of restructuring. That included closing one of its joint-venture plants, reportedly the facility in Shenygang run in partnership with MG owner SAIC. It will also streamline its Buick, Cadillac and Chevrolet line-up as it tries to return its Chinese operations to profitability. It blamed “aggressive competition” with local players experiencing “significant growth in customer acceptance” in its end-of-year report.

Ford largely restructured in 2023 at a booked cost of almost $1bn to move away from the mostly hotly contested segments and focus instead of ‘hero’ cars like the Bronco off-roader and Ranger pick-up truck.

Nissan cut 500,000 units of capacity from its manufacturing operations in China after last year closing its Changzhou plant, run with Dongfeng Motors, where it largely made the Chinese-market Qashqai. Like many global car makers faced with over-capacity in China, Nissan is looking to exports to keep the lights on, with the Middle East one target region.

The premium brands had been largely insulated from the competition and discounting from local players, but 2024 was the year when those red tides started lapping at their dealerships amid a wider economic slowdown.

JLR sales fell 14% to 91,115 in 2024, accelerating to 25% in the quarter to the end of December. Mercedes posted sales down 7.3%. Aston Martin said the luxury car market fell 35% last year, a crash that “wasn’t forseen” by the main players, according to Hallmark, who has long experience in global luxury sales in his previous job as Bentley CEO.

All the premium brands have had to prop up dealers amid a string of insolvencies related to the slowdown, and some are taking the opportunity to shrink now to prepare for a smaller market in the future.

“We need some time work out whether what's going on in China is cyclical and it will rebounce or whether it will not rebounce and will go further down from here,” JLR CFO Richard Molyneux said on the company’s latest earnings call.

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Porsche meanwhile has said it has taking steps to shrink its sales operation built for 100,000 sales rather than sub-60,000 amid a 28% drop in 2024.

Mercedes told investors it was looking to take 20% of fixed costs in the local market. “We see a very competitive environment continuing in China in 2025,” CFO Harald Wilhelm said on its recent capital markets day.

If this wasn’t bad enough, car makers are also competing against their own products, which are returning back on the used market in ever greater numbers.

“The Chinese market now has got a very pronounced second-hand market,” said Volvo CEO Jim Rowan on his company’s latest earnings call. “Selling 25 million cars is much easier to do [without] a very mature second-hand market.”

The other key factor is the strength of the local players in the competitive fields of EVs, plug-in hybrids and extended-range EVs (EREVs), which use a small petrol engine as a generator.

Last year, these 'new-energy vehicles' (NEVs) contributed to 47% of Chinese car sales, with EVs leading at 6.3m, according to data from Jato Dynamics, followed by PHEVs at 3.3m and EREVs at 1.2m, double that of 2023’s figures.

In this category, global car makers are lagging badly, with the January NEV sales from the CPCA showing only Tesla competing with any strength here in fourth, with 63,238 sales.

Volkswagen was next among the non-Chinese makers in ninth with 24,696, beaten by Chinese firms including Leapmotor (which is backed by Stellantis) and Xpeng (Volkswagen's new technology partner in China).

The Japanese in particular are way down the list, although they’ve earmarked 2025 as the year they try to pull themselves back into contention with a raft of new EV products.

These include Honda’s S7 SUV, one of 10 EVs that the brand aims to launch in China by 2027. Nissan will launch the N7 electric saloon this year, too, and Mazda is already selling its EZ-6 saloon, which is coming to the UK.

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The competition is formidable, however. Chinese firms' agility, speed, cost base and knowledge of the changing needs of local customers currently have global car makers on the back foot.

“Their operational fitness is incredible,” Ford CEO Jim Farley recently told the Wolfe Research Conference.

Then again, the battle to secure customers and keep multiple factories running amid a consumer downturn has led to vicious discounting, hurting everybody.

“It’s a huge price war. No one is making money in China and there's a lot of overcapacity,” Farley said.

That will require car makers to merge, and reportedly two of China's biggest, Dongfeng and Changan, are planning exactly that.

It's not all gloom in the country. Mercedes, for example, reported that its joint venture with BAIC made a 15% operating margin last year. Mercedes still sold 683,568 cars there last year, double that of it the US. Most of were made locally.

The German brand wants to localise more parts and bring in more Chinese partners to take advantage of some of the cost saving enjoyed by local rivals.

Tech boss Markus Schäfer pointed to the development of a four-cylinder engine there “that could take us to cost levels that we have not seen before” at the company’s recent capital markets day.

Ford meanwhile said it had made $600m in China in 2024 as it focused more on high-end models like Bronco and ended production of cars in the commodity end of the market, like the Ecosport and Kuga.

The premiums are pushing upwards too. The high-margin Range Rover is currently JLR’s focus in China, Molyneux said, while Mercedes is finally localising production of its big GLE SUV – a car it has long imported. Aston Martin dropped the six-cylinder China-special version of the DBX to concentrate on the V8 and wants to push its profitable sports-car specials.

Still, it will remain a tough market for global manufacturers. Trade wars are bad news in a politicised car market like China. It might not be coincidental that the American share of the Chinese market sank from 6.1% last year to just 5.3% in January, just as new president Donald Trump’s trade belligerence started in earnest. The Germans meanwhile saw their share rise from 17.7% to 18.4%.

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China’s homologation rules are tightening too, putting extra pressure on manufacturers. Tougher fuel consumption laws are coming in January 2026 for ICE cars; limits on energy consumption for EVs are also slated for 2026; and car companies are bracing for new PHEV standards.

The market is too big for the global players to just walk away from, however, even if some like Stellantis have done just that.

“Even though the market conditions have shifted significantly, even though China is a different place now than it was maybe three or four years ago, I would say that we're staying the course,” Mercedes CEO Ola Källenius said.

The money will return, too, driving customers back into luxury showrooms belonging to the likes of Aston Martin, said Hallmark: “Will China come back? Of course it will. We just don't know when.”