The collapse of (insert European brand here) in China.

If we look at the news and sales figures that have been coming to us in recent months from China, we could title a good part of our articles like this and we would be very slightly wrong.

The latest to reflect the damage that local manufacturers are doing to European companies is well exemplified by “the Porsche case”. The Germans have seen how their sales have collapsed in the Asian country and, with them, their profits.

In October, those from Stuttgart confirmed during its presentation of results that its turnover had fallen by 5.2% between January and September. But the most alarming fact was the drop in its net profits, which plummeted by 29.8% in the first nine months of the year.

That bad news came driven, above all, by China. At the end of Q3 2024, Porsche had sold 221,304 vehicles, which is 11.6% fewer cars than the previous year. But the biggest problem is in China where they had delivered 28.8% fewer cars than in the same period in 2023.

And everything indicates that the data will not be much better regarding the last three months of 2024. They point out in Coach that the company had not been below 1,000 million euros in profit for 10 quarters. That is, more than two and a half years in which it has grown by selling more vehicles but also much more expensive models.

The need to adapt to the local market

They explain in ShanghaiDaily that the company has undertaken an aggressive discount campaign to try to rescue its sales but that, despite this, the company expects a drastic drop in deliveries this year. In fact, in the quest to save costs, CarNewsChina confirmed that the company will reduce the number of dealerships it has open in the country by almost a third.

Lutz Meschke, CFO of Porsche, assured some journalists according to Reuters that “China is proving to be an incredible challenge. Not only for Porsche. We can assume that, in the future, China won’t be the market it used to be for European manufacturers.

Meschke’s words are unflattering for European and, especially, German vehicle manufacturers. premium or luxury. In addition to Porsche, Mercedes is also immersed in cutting its expenses as a result of a sharp drop in sales in China. Financial Times It also reported in October that its drop in sales in the Asian market was 17%.

Like Porsche, Mercedes has carried out a harsh price cut to try to make its electric cars more attractive in China. Motorpassion explains that their Mercedes EQE have reduced their price by up to half and, despite this, since July they have not placed more than 10 units (each month) on the Chinese market.

The trend has been repeated with other manufacturers and is the result of a strategy that has been showing signs of exhaustion for many months. At the end of 2022, it was already beginning to be warned that this could happen. While in Europe most brands had been abandoning volume sales to focus on profitability, in China this was not working for them.

The explosion of the electric car in China has diluted the traditional values ​​associated with luxury that Western manufacturers sold, allowing them to sell above the rest of the market. However, electric technology has made it easier for Chinese companies to offer the same features and performance than the Europeans. You just have to look at the example of Xiaomi and how it has targeted Tesla and Porsche since the early days of its Xiaomi SU7.

Having reached the same level of performance, local manufacturers have focused on other types of services that meet the demands of Chinese users more successfully than European ones. They have a specific product for their potential customers, whom they seem to understand better, and they have also managed to match the Europeans in mechanical performance, diluting their main purchase value.

Kevin Williams, journalist InsideEVsexplained it well in an article titled I’ve been to China and driven dozens of electric cars. Western manufacturers are at a loss. In it he pointed out that the interior of Chinese cars shined compared to Western cars, loaded with technology of all kinds, such as 4K OLED screens on which video games can be played.

Regarding this, he expressed himself in Bloomberg a Chinese buyer. Ryan Xu claimed that he had had Mercedes or Porsche cars in his garage but that the Porsche Taycan had disappointed him because “It was just an electrified Porsche. That’s all“. Regarding Audi, Mercedes or Porsche, he concluded “it is difficult to see them as luxury cars.”

The latter is a real problem for these companies. In his article for InsideEVsWilliams also made the same reflection, pointing out that the interior of the cars he rode in were finished like any other car. premium western. And it is something that also coincides with the MHP consulting who works with Porsche and whose senior director has been warning for some time that “Chinese cars are indistinguishable in quality from European ones.”

All of this indicates that these Western manufacturers must make significant efforts to adapt to the local Chinese market and, if they do not want to continue losing market share, they will have to bow to its demands and begin to accept the demands that come to them from there.

Mazda has found a small success with its Mazda EZ-6 where it was not expected. Its association with Changan has allowed it to put on the market an electric car with its own aesthetics but that adapts its interior to the particularities of the Chinese market. It is not the only company that has taken this path. Volkswagen announced some time ago that it was looking for Chinese engineers to understand what it could offer in the local market.

We see the first results of specific cars designed by and for China with Audi. While in Europe they are considering closing plants, this week we learned that they are beginning to manufacture electric cars that will not leave Chinese bordersin collaboration with FAW and SAIC, large Chinese giants with whom they have traditionally been associated. These will be added to the vehicles that arrive as a result of its direct collaboration with XPeng.

This association was born from the need to adapt the German product to what the local public demands but also to ensure that the production and development times of new models are drastically reduced, trying to fight in a market where novelty and immediacy, as well as the Chinese product over the traditional intangibles that have been associated in Europe with driving a Mercedes, a Porsche or an Audi.

All of this has been devastated by a market that is clearly committed to material things, to cutting-edge technology in the service sector and to making the car something radically different from what we in Europe have always understood as a car.

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