Photo/Li Xing (NBD)

China’s luxury car market has seen a price war and a sales boom in the past year, but it also faces a growing challenge from domestic electric car brands that aim to challenge the dominance of the traditional players.

According to the latest data from the China Passenger Car Association, the average price of luxury cars in China dropped from 340,400 yuan ($52,700) in 2019 to 328,000 yuan ($50,800) in 2023. However, the lower prices boosted sales. The data showed that the wholesale sales volume of luxury cars in China reached 3.39 million units in 2023, up 9.7% year-on-year.

Among the luxury car brands that have announced their 2023 sales figures, only Cadillac and Lexus saw a slight decline, while the rest achieved positive growth. However, the competition in the luxury car market has become fierce, as many domestic electric car brands have raised their prices while also offering more discounts and features.

In 2024, the luxury car market will face a dilemma: whether to defend their market share or to launch an offensive to expand their customer base. This is the question that the luxury car makers are trying to answer.

BMW tops the luxury car sales ranking

The sales ranking of BBA (Mercedes-Benz, BMW and Audi), the three leading luxury car brands in China, has always been a highlight of the market. In 2023, BMW Group (BMW and MINI cars) won the crown with a sales volume of 824,900 units; Mercedes-Benz followed closely, delivering 765,000 new cars throughout the year; Audi ranked third, delivering more than 729,000 units in China. In terms of growth rate, Audi had the strongest momentum, with a year-on-year increase of 13.5%, while BMW Group grew by 4.2% and Mercedes-Benz by 1.77%.

Expanding to the global market, BMW Group delivered about 2.5553 million BMW, MINI and Rolls-Royce cars in 2023. Audi delivered about 1.9 million units to global customers. Based on this trends, the sales volume in China accounted for 32% and 38% of BMW Group and Audi’s global sales, respectively.

Domestic electric car brands challenge the luxury car market

With the continuous advancement of electrification and intelligence, domestic car brands have risen rapidly and launched an attack on the high-end luxury car market. Li Bin, chairman of Nio, once said that he wanted to change the “BBA pattern” to “NBA”, and Li Xiang, chairman and CEO of Li Auto, even claimed that he had “the confidence to challenge BBA’s sales in China by 2024”.

Behind the “declaration of war” by Nio and Li Auto, BBA’s performance in the all-electric car market was quite different from that in the fuel car market. For example, BMW brand sold nearly 100,000 all-electric models in 2023, a year-on-year increase of more than 138%, of which BMW all-electric models achieved a monthly sales volume of more than 10,000 units; Audi’s all-electric e-tron series models delivered 31,000 units in China in 2023; Mercedes-Benz’s all-electric models achieved a year-on-year doubling of deliveries. In contrast, Nio delivered more than 160,000 units in 2023, and Li Auto delivered more than 370,000 new cars.

Electrification will still be the keyword for BBA in 2024. In the first quarter of 2024, Audi Q6 e-tron will make its global debut. Audi CEO Markus Duesmann said: “From 2024 to 2025, Audi will strengthen and enrich its product lineup. Among them, the new electric models will be our focus.”

In addition, Mercedes-Benz’s first all-electric product of the G-Class off-road vehicle, the new Maybach EQS pure electric SUV and the new AMG all-electric EQE 53 SUV, the new generation of Mercedes-Benz EQA pure electric SUV and EQB all-electric SUV will all debut or land in the Chinese market within this year.

Domestic electric car brands impact the second-tier luxury car market

Recently, some netizens said that “if you don’t work hard, you can’t afford domestic cars”. And from the current price of domestic car models, whether it is the pre-sale price of 800,000 yuan ($124,000) of Nio ET9 or the price of up to 1.098 million yuan ($170,000) of Yangwang U8, they make this seemingly joking argument become real.

The rising prices of domestic electric cars are eroding the market share of some car models. “The order of attack on fuel cars by (electric cars) is: first, the second-tier domestic brands, joint venture brands and luxury brands; second, the first-tier joint venture brands; third, the first-tier luxury brands.” Li Xiang once expressed this view publicly.

This argument is more evident in the sales ranking. In 2023, Li Auto delivered more than 376,000 new cars throughout the year, a year-on-year increase of 182.2%. This was higher than the top three sales rankings of the second-tier luxury car market, namely Cadillac (which sold more than 183,000 units in China in 2023), Lexus (which sold 181,400 units in China in 2023) and Volvo (which sold 170,000 units in China in 2023).

In addition, Jaguar Land Rover, which had the best sales growth in the second-tier luxury car market (delivering 106,400 units in China in 2023, a year-on-year increase of 25%), still had a lower annual sales volume than some domestic electric car brands. For example, Nio delivered more than 160,000 units in 2023, a year-on-year increase of 30.7%.

At present, the second-tier luxury car market is speeding up the transformation of new energy. For example, Volvo announced that it will become an all-electric luxury brand by 2030; Cadillac announced that it will launch three new models of IQ all-electric by 2024.

But the development speed of domestic electric car brands is also accelerating. At the beginning of 2024, Li Xiang revealed on social media that Li Auto aims to challenge the annual sales of 800,000 units, the monthly delivery of 100,000 units, the monthly delivery of 30,000 units per car, and the number of supercharging stations reaching 2,000 in 2024. Li Xiang said: “Looking forward to 2024, we are committed to becoming the number one luxury brand in the Chinese market.”

Under this situation, how will the luxury car brands cope with the strongest impact from the domestic car brands in 2024? A new “battle” has begun.