After decades of leading China's high-performance car market, German automakers are facing increased competition from Chinese manufacturers, who have redefined high-end vehicles to prioritize electric, smart, and affordable options.
New Chinese models, such as the Xiaomi SU7, closely resemble their German counterparts. The SU7, for example, competes with Porsche's Taycan in terms of power and braking, while also featuring integrated artificial intelligence for tasks like parking assistance and personalized greetings. Notably, the SU7 is priced at about half that of the Taycan.
This shift in the market has resulted in declining sales for German brands, with Xiaomi selling over 100,000 units of the SU7 last year. Porsche has been particularly affected, reporting a 28 percent drop in deliveries in China for 2024, which contributed to a 3 percent decrease in its global deliveries despite increases in other regions.
Historically, German automakers have depended on the Chinese market to compensate for lower demand elsewhere, which has led to an oversight of significant challenges at home. A key issue has been their hesitance to adopt the technology that is now essential in China, including electric vehicles with advanced software and artificial intelligence.
Experts note that established Western manufacturers have underestimated the rapid development of Chinese automakers in critical areas such as electro-mobility and software-defined vehicles. Chinese consumers are increasingly open to considering domestic brands as premium options.
In response to its declining performance, Porsche has announced leadership changes, including the departure of its finance chief and a top sales executive. Additionally, external pressures, such as potential tariff adjustments from the U.S. government, could further impact Porsche's market position, as the brand primarily exports to the U.S. from Germany.
Porsche also plans to cut up to 1,900 jobs in Germany due to a global demand decline. Sales of the electric Taycan have nearly halved, and interest in the new hybrid Panamera has also decreased, particularly from Chinese buyers.
The changing preferences of consumers are illustrated by individuals like Seaky He, a social media content creator in China, who traded her Mercedes-Benz for a Xiaomi SU7 last year, drawn by the vehicle's modern features.
While the SU7 is not yet widely available for export, it has garnered attention, with some models reaching the U.S. market. Ford's CEO expressed enthusiasm after personally testing a SU7, highlighting its appeal.
Xiaomi is also preparing to release a performance version of the SU7, which recently set a record for the fastest four-door sedan on Germany's Nürburgring racetrack, outperforming the Porsche Taycan by 20 seconds. However, comparisons between the two vehicles are complicated by differences in their competing categories.
Industry experts emphasize that German automakers must enhance their innovation to maintain their market position, as Chinese manufacturers are proving to be equally or more innovative.