How Mercedes, BMW, and Audi can reclaim their position in China

For decades, German luxury carmakers Mercedes-Benz, BMW, and Audi embodied prestige and engineering excellence, leading the global market with promises like “The best or nothing” and “Sheer Driving Pleasure.” These brands were global leaders, particularly in China, which had become their largest and most crucial market. But recent profit warnings have exposed the growing challenges they face in maintaining this dominance. Profit warnings: A wake-up call Mercedes-Benz, BMW, and Volkswagen’s Audi brand have all sounded alarms over declining profitability, citing market headwinds like supply chain disruptions, inflation, and currency fluctuations. But these challenges mask a more fundamental issue: their inability to keep pace with China’s rapidly changing market and the shift to electric vehicles (EVs). Once a growth engine, China is now a difficult terrain for these brands. I’ve often written about how Chinese luxury consumers’ preferences have evolved dramatically across categories. In 2020, a report showed that for the first time, Chinese Gen Z consumers prioritized Chinese car brands over German ones—a sign that something fundamental had shifted. Today’s buyers, especially Gen Z and young millennials, don’t just want an expensive car with a prestigious logo. They want experiences, emotional connections, and cutting-edge digital features—areas where German brands have fallen behind. Mercedes-Benz and Audi, in particular, are struggling to attract buyers for their electric models. Without significant changes, their future in China looks precarious. Where it went wrong: A cultural disconnect The core mistake has been underestimating the pace of change in China’s luxury market. I often refer to China as an “ecosystem of speed”—a market that transforms rapidly, where local companies are exceptionally customer-centric. The German brands, in contrast, have been slow, detached, and behind in design, technology, and customer experience. For Chinese consumers, quality is a given. What really matters is advanced technology, seamless digital integration, and alignment with cultural values like sustainability and innovation. But German brands have missed the mark, falling behind while local brands like Nio and BYD, and even Tesla, capitalized on the EV and digital revolution. These brands have remained rooted in Western paradigms, failing to adapt their customer engagement strategies to the Chinese market. Today’s Chinese consumers, especially the influential Gen Z, expect localized stories that resonate with their cultural values and aspirations. Local brands like Nio excel at creating community-driven experiences and seamless digital ecosystems, while German brands often rely on outdated luxury cues that fail to inspire this sophisticated audience. What must be done: A shift from product to experience To regain their foothold in China, German carmakers need to move from a product-centric approach to one that focuses on customer experience and emotional connection. This requires three key changes: First, digital transformation must be at the core. Chinese consumers live in a tech-driven world, and luxury automakers must offer a digital ecosystem that integrates seamlessly into daily life. Mercedes, BMW, and Audi need to revolutionize their in-car technology, software, and AI features. But catching up won’t be enough—they need to lead in these areas, where they’ve traditionally been weak. Second, localized storytelling is essential. Brand prestige alone no longer resonates. To connect with Chinese consumers, especially Gen Z, brands must create narratives around self-expression, convenience, and innovation. They need to go beyond product features to tell stories that align with the values of their audience. Third, sustainability and EV leadership are non-negotiable. Eco-consciousness is growing in China, and brands that lead in sustainability are winning consumer loyalty. German carmakers must accelerate their EV efforts and innovate beyond incremental changes. Right now, their efforts seem more reactive than visionary, which won’t be enough to compete with Tesla, BYD, and Nio. The road ahead: Reinvention or decline For Mercedes, BMW, and Audi, the profit warnings should be seen as a call to action, especially in China. The market is no longer an opportunity to export Western prestige. Instead, luxury carmakers must rethink how they deliver value in a rapidly evolving, tech-driven, and eco-conscious environment. Brands that pivot quickly, embracing digital transformation and aligning with Chinese cultural values, have a chance to regain their position at the top. Those that don’t will risk becoming relics, overtaken by more agile, customer-centric competitors that offer higher perceived value. In China’s luxury market, every interaction and experience counts. German automotive giants must adapt faster, think smarter, and act bolder if they want to stay relevant in this crucial market. This is an opinion piece by Daniel Langer, CEO of Équité, recognized as one of the “Global Top Five Luxury Key Opinion Leaders to Watch.” He serves as an executive professor of luxury strategy and pricing at Pepperdine University in Malibu and as a professor of luxury at NYU, New York. Daniel has authored best-selling books on luxury management in English and Chinese, and is a respected global keynote speaker. Daniel conducts masterclasses on various luxury topics across the world. As a luxury expert featured on Bloomberg TV, Forbes, The Economist, and others; Daniel holds an MBA and a Ph.D. in luxury management, and has received education from Harvard Business School. Sign up for his masterclasses at the Jing Academy. Follow him: LinkedIn and Instagram. All opinions expressed in the column are his own and do not reflect the official position of Jing Daily.

How German cars can win China’s Gen Z

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How German cars can win China’s Gen Z