The automotive industry in China has entered a significant transformative phase as we move further into the 2020s, with a clear shift from traditional fuel-burning luxury vehicles to electric and hybrid modelsThe year 2024 has marked a pivotal point for established luxury automakers such as BMW, Mercedes-Benz, Audi, and Porsche, commonly referred to as BBA, alongside PorscheReports suggest these brands have faced challenging performance metrics in the Chinese market, a place that historically enjoyed solid sales for luxury vehicles.

In examining the numbers, the decline is starkMercedes-Benz, in the third quarter of 2024, experienced a 12.9% drop in sales in ChinaSimilarly, BMW's cumulative sales from January through September 2024 stood at 524,000 units, reflecting a year-on-year decline of 13.1%. Audi followed suit with an 8.5% drop in sales, attributed to trends influencing consumer preferences and market dynamics

Porsche revealed an even more striking statistic, reporting a 28.75% decrease in new car sales, down to 43,300 units during the first three quarters of 2024. These figures paint a worrying picture for luxury traditional automakers trying to hold onto their market share.

Adding another layer to the narrative, it's essential to highlight the operational changes these brands are undertaking or planning, including the shuttering of numerous dealership locations in ChinaThis trend is concerning as it illustrates more than just sluggish sales; it marks an impending "retreat" of luxury auto brands from a market they once dominatedPorsche has announced intentions to close nearly 40 of its dealerships by the end of 2026, representing nearly 30% of its dealer network in ChinaAdditionally, BMW's first-ever 5S dealership in Beijing has announced its closure, further underscoring the difficult landscape for traditional luxury automakers

Competitors like NIO have even taken over some of the biggest 4S dealerships for brands like Mercedes and Audi, showcasing the rapid ascendancy of new energy vehicle manufacturers.

Contrasting sharply with the struggles of BBA and Porsche, domestic new energy vehicle manufacturers are reveling in unprecedented successBYD, the Chinese powerhouse in electric vehicles, reported selling an astounding 4.272 million units in the year, representing a 40% year-on-year growth and an impressive revenue increase of 15.76%, reaching 301.13 billion yuanLi Auto's figures reveal quarterly revenue growth of 23.6%, with total deliveries surpassing 500,000 vehiclesNIO predicts sales will reach 220,000 units by year's end, with first-half revenue soaring by nearly 99%, underlining the remarkable performance of these domestic companies.

The struggles faced by traditional automakers can be attributed to their continued dual focus on both traditional fuel vehicles and the rapidly growing electric segment

This "dual-hearted" strategy has spread resources too thin, leaving companies insufficiently focused in either category to fully optimize development and respond to market changes swiftlyAs automotive technology evolves, the transition from internal combustion engines to electric power is becoming less a matter of choice and more essential for survival.

Furthermore, the transition to electric vehicles extends far beyond just replacing fuel with electricity; it demands comprehensive upgrade across the entire automotive supply chainThis includes everything from research and design to manufacturing and after-sales serviceEuropean traditional automakers find themselves at a distinct disadvantage here, as they grapple with extensive historical baggage and inertia that stifle innovation and responsiveness.

Particularly instructive is the example of China, where a fully integrated ecosystem has emerged within the new energy vehicle industry

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The supply chain, from upstream raw material suppliers and battery manufacturers to downstream charging infrastructure and maintenance services, operates seamlesslyIn contrast, the European new energy vehicle landscape remains fragmentedThe collaboration between parts suppliers and technology providers is insufficient, meaning the overall efficiency lag behind that of China's industryAs of October 2024, China boasts 3.391 million public charging stations compared to Europe's mere 900,000, highlighting a stark disparity in infrastructure development capabilities.

Looking ahead to 2025, as the global automotive industry accelerates towards electrification and digitization, several key trends appear poised to shape the industry's futureOne prediction is that the market share of new energy vehicles in China will continue its upward trajectoryZhang Yongwei, vice-chairman and secretary-general of the China Electric Vehicle Hundred People's Association, forecasts that total vehicle sales could reach 32 million in 2025, with new energy vehicles accounting for about 16.5 million, surpassing 50% of total sales

This would position China as the first country globally where electric vehicle sales outpace those of traditional internal combustion engines, thereby achieving government-set targets ahead of schedule.

Moreover, the advancement of autonomous driving technology promises new avenues for growth within the electric vehicle ecosystemThe China Intelligent Connected Vehicles Innovation Alliance anticipated as early as 2020 that by 2025, the sales of fully and conditionally autonomous vehicles would represent over 50% of total automotive salesAdditionally, the penetration rate of C-V2X technology—cellular vehicle-to-everything communication—should reach 50% among new vehicles, indicating a growing consumer willingness to invest in cars equipped with autonomous features.

Furthermore, with increasingly stringent global carbon emission standards, the application of green energy solutions will likely expand

Chinese new energy vehicle manufacturers are quickly ramping up their efforts to enter international marketsCompanies like BYD and Leap Motor are establishing production facilities in EuropeLeap Motor has even formed a joint venture with Stellantis Group to export its flagship global SUV, the C10, to European markets, posing a significant challenge to established brands like BBA.

However, as the market undergoes a natural selection process, the competition among domestic new energy vehicle companies will also intensifyToday, many new energy firms are still facing financial losses, with only a few, like BYD and Li Auto, currently profitableThe intensifying competition coupled with rising technological barriers will likely squeeze out companies that lack core competencies or fail to manage costs effectivelyUltimately, we can expect that only those companies capable of sustained innovation and maintaining financial viability will emerge victorious.

In conclusion, 2025 heralds not only a critical transition year for the new energy vehicle market but also represents a defining moment for the establishment of a new industry order