China signals: BYD’s ascent, beauty’s foreign retreat, new growth engines

Macro-level realignments reverberated into the new year. In a historic shift, BYD overtook Tesla as the world’s top EV seller, embodying China’s climb up the manufacturing value chain, while Porsche and others retrench in the cooling premium segment. Concurrently, the exodus of over 20 foreign beauty brands from the Chinese market, including Kenzo and Filorga, signals a new phase of localization-or-bust competition. Against this contraction, two growth vectors emerge: inbound tourism’s resurgence and short-format drama’s mainstream breakthrough, showcasing China’s rising appeal as both a destination and a source of global digital content. BYD’s global lead signals a structural shift in automotive power Market intel: BYD surpassed Tesla in global pure-electric vehicle sales in 2025, a historic milestone fueled by a 150% surge in overseas deliveries. Tesla’s sales fell for a second consecutive year. This reversal coincides with a sharp strategic retreat by traditional premium players like Porsche, which is dramatically reducing its Chinese retail network amid a three-year sales slump, highlighting widespread pressure in the sector as growth forecasts moderate globally. Market indicator: The BYD-Tesla flip is more than a sales milestone; it symbolizes a transfer of initiative in the auto industry’s defining transition. China is no longer just the world’s largest car market but a primary source of global innovation, scale, and competitive pricing. For luxury automakers, the challenge is twofold: defend against premium Chinese EVs while navigating a domestic market where even storied brands like Porsche must prioritize profitability over prestige, signaling a painful yet necessary correction after years of expansion. Foreign beauty exodus underscores the ‘localize or leave’ imperative Market intel: A wave of international beauty brands, including Kenzo Fragrances and Filorga, exited or scaled back sharply in China in 2025. This retreat, comprising over 20 brands, is attributed to an inability to compete with agile domestic players on digital marketing, product localization, and value proposition. The departures highlight a market where historical brand equity is insufficient without deep, sustained adaptation to Chinese consumer preferences and purchase journeys. Market indicator: The beauty sector is a leading indicator of a broader trend: China’s consumer market is maturing into a hyper-competitive arena that favors speed and cultural resonance. Success no longer hinges on distribution alone but on a brand’s ability to tell a compelling, localized story and innovate at the pace of social media. For luxury beauty, this means moving beyond token ambassador appointments to fundamentally rethinking product development, ingredient narratives, and community engagement for the Chinese context. Inbound tourism’s surge points to an untapped trillion-RMB opportunity Market intel: China's inbound tourism bookings doubled year-on-year in the first three quarters of 2025, driven by expanded visa-free policies. Source markets diversified beyond Asia to include rapid growth from Russia, Australia, and the U.S. Travel patterns are deepening, with tourists exploring lesser-known destinations like Chongqing and Datong. Despite the surge, inbound tourism revenue remains below 0.5% of China's GDP, indicating massive untapped potential estimated at 1-2 trillion RMB ($143.2 billion to $286.4 billion). Market indicator: The inbound tourism boom represents a strategic soft-power and economic opportunity. For luxury, it makes China a compelling destination for high-spending visitors. Brands should view flagship stores in key cities not just as local retail points but as experiential hubs for this growing international audience. The trend encourages investment in cultural retail, hospitality collaborations, and city-specific storytelling to capture the spending of a more curious and dispersed global traveler. Short drama boom highlights the mainstream breakthrough of digital-first content Market intel: China’s short-format drama market achieved mainstream acceptance and explosive growth in 2025, evolving from a niche into a full-fledged content category. The genre diversified beyond romance into family sagas and historical stories, with production quality improving significantly. Over 100 series were broadcast on satellite TV, and the market is accelerating toward industrialization, with centralized platforms managing copyright and distribution for a sector approaching an estimated scale of 100 billion RMB ($14.3 billion) by 2027. Market indicator: The legitimization of short-format drama is a cultural and commercial watershed. It represents the full maturation of mobile-first, algorithm-driven entertainment, creating a powerful new channel for brand integration and narrative marketing. For luxury brands, this opens a frontier for product placement and storytelling that is native to the platforms where Chinese consumers spend their time. The genre’s move to TV signals its broad demographic appeal, offering a unique bridge between digital buzz and mass-market cultural credibility.

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China signals: BYD’s ascent, beauty’s foreign retreat, new growth engines