More than four decades after Volkswagen first amazed crowds at a Chinese auto show, the German automaker has lost its leading position in China. Domestic brands are now capturing the younger generation of consumers, who prioritize high-tech experiences.

In the world's largest auto market, the traditional appeal of "Made in Germany" in the internal combustion engine vehicle segment has significantly weakened. Chinese automakers are launching stylish and affordable electric vehicles that function essentially like "smartphones on wheels."

Volkswagen's CEO for China, Ralf Brandstätter, admitted to Reuters: "Perhaps in the eyes of some younger consumers, we are seen as our fathers' brand."

Caught off guard by the rapid rise of Chinese brands, Volkswagen, along with its subsidiaries Porsche and Audi, as well as competitors BMW and Mercedes-Benz, have all seen substantial sales declines in China. A market that once contributed one-third of their global sales has now become a challenge they are urgently trying to overcome.

After holding the top sales spot among automakers in China for 25 years, Volkswagen was overtaken by electric vehicle giant BYD in 2024. In 2025, it was further pushed down to third place by Geely.

Brandstätter stated that for these German automakers, the transformation of the Chinese auto market from a "growth engine" to an "intense battleground" has been "beyond imagination."

From Market Pioneer to Electrification Laggard

When Volkswagen first participated in the Shanghai auto show in 1985, the high-quality promotional materials from the German side left a strong impression on Chinese attendees at the time.

Carl Hahn, the then-CEO who spearheaded Volkswagen's entry into China, wrote in his memoirs: "The venue was packed. Brochures were snatched up as soon as they were put out. For people back then, the mere quality of the paper and printing was astonishing, and the desire to own a car was immense."

However, at this year's Beijing Auto Show opening this Friday, German auto groups can no longer rely solely on superior marketing materials to stage a comeback.

Automakers like Volkswagen, who once dominated combustion-engine vehicle production, are now racing to catch up. In China, pure electric vehicles already account for over a quarter of new car sales.

As the Chinese auto market evolves, domestic brands have launched a multitude of electric vehicles that closely match consumer preferences, leading to a continuous erosion of the market share held by German manufacturers. Data from S&P Global Mobility shows that their total sales in China fell by a quarter over five years, dropping to 3.9 million units in 2025.

Analysts note that the challenge for German automakers has intensified further this year, as Chinese brands begin targeting the premium segment, aiming directly at high-spending consumers who previously favored German quality.