Chinese Technology Saves Western Automotive Brands

Western car manufacturers are struggling to remain relevant in the world’s largest automotive market by developing new electric vehicles made with the help of Chinese technology, which they then aim to launch in other international markets, reports the Financial Times. Two years after brands like Volkswagen and Toyota unveiled plans to regain market share through cars developed with local knowledge under the ‘in China for China’ strategy, executives hope to attract customers with a range of new products showcased at this year’s auto show in Beijing.

– “We want to stabilize this year, but we assume that with all models, we will be able to grow again in China,” said Jochen Goller, a member of BMW’s management board.

The German group will present its electric SUV iX3 with an extended wheelbase, developed in China using local technologies from companies Momenta, Huawei, and Alibaba. Foreign car manufacturers have significantly lost sales in China in recent years due to the rise of domestic competitors and new players like BYD, Geely, and Xiaomi, in a market where electric vehicles and plug-in hybrids now account for more than half of new sales.

Their share of the Chinese market has fallen to 32 percent this year, down from 64 percent in 2020, according to data from the Shanghai-based consulting firm Automobility. After a decade in which Chinese brands learned car manufacturing from Western partners through joint ventures, the situation has reversed, forcing Volkswagen, Toyota, and others to rely on Chinese partners and supply chains to develop vehicles with advanced software more quickly. Although the largest European car manufacturer has long produced vehicles locally, it is now also designing and developing them in China.

– “We are so big in China that we cannot just leave because we see that what we have long done in Europe is not competitive in the Chinese market,” said Martin Sander, head of sales at VW, at an event in London last month.

After changing strategies, the first signs of improvement have emerged, although analysts warn that long-term growth is not guaranteed. VW regained the top spot with a market share of 13 percent in the first quarter of 2026, ahead of Geely and BYD, mainly due to a decline in sales of electric vehicles from domestic manufacturers following the removal of government subsidies last year.

The German brand, whose vehicles are still mostly internal combustion engine-powered, plans to launch 13 plug-in hybrid and electric models this year solely in China.

– “We are also considering options to launch these vehicles in other parts of the world to face competition,” said Sander.

Business in China as a Key to Success

Audi has felt a broader weakening of demand for electric vehicles. Last year, it launched the E5 Sportback, a sub-brand aimed exclusively at China, without the recognizable four-ring logo. However, at the beginning of this year, it had to offer significant discounts to stimulate demand.

– “We need time to really increase brand recognition and sales volumes,” said Audi CEO Gernot Döllner, adding that two more models will follow after the E5.

After a $5 billion write-off at the end of 2024, General Motors announced that its business in China is once again profitable, with hybrids and electric vehicles accounting for more than half of sales. However, the focus on higher-margin models has led to a 21 percent drop in sales in the first quarter. Nissan plans to increase total sales in China and exports from it to one million vehicles by 2030, up from 660,000 last year.

To achieve this, the Japanese manufacturer will deepen cooperation with its Chinese partner Dongfeng and launch the electric model N7 in Latin America and Southeast Asia, as well as the plug-in hybrid pickup Frontier Pro in those markets and the Gulf.

– “China is becoming a global center for innovation and export,” said Guillaume Cartier, Nissan’s performance director.

Chris Liu, an electric vehicle analyst from the consulting firm Omdia in Shanghai, pointed out that the real gap for foreign manufacturers in China is no longer in hardware or EV platforms, but in software, and that this is fundamentally a problem of talent shortage.

– “China offers scales of software engineering talent that are hard to replicate, both in volume and speed of development. As long as foreign manufacturers can attract top software talent in China, they remain relevant. However, staying competitive depends on whether they can truly operate at the speed of development that prevails in China, and not just participate in the talent market,” Liu said.