The Chinese electric car illusion? Recalls, breakdowns, losses: The shocking figures that China's auto industry is hiding.
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Published on: November 7, 2025 / Updated on: November 7, 2025 – Author: Konrad Wolfenstein
The Chinese electric car illusion? Recalls, breakdowns, losses: The shocking figures that China's auto industry is hiding – Image: Xpert.Digital
“Suicidal”: Why even Chinese bosses are warning against their own electric car boom
The truth behind the price war: Why China's cheap cars can be an expensive trap and how the hasty strategy is jeopardizing the reputation of electric cars.
Particularly revealing is a look at the discussions in Chinese social media itself, which paint a much more differentiated and often more critical picture of the domestic electric car industry than is often perceived in Western reporting.
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- The topic suggestion and key impulses for this analysis come from a LinkedIn post (with video) by Axel Kruse .
While headlines are dominated by the unstoppable flood of Chinese electric cars and the alleged panic of traditional German manufacturers, a reality often overlooked lies behind the facade of the boom. An in-depth, data-driven analysis reveals a picture full of contradictions: an aggressive expansion strategy is juxtaposed with alarming quality problems, ranging from mass recalls at market leaders like BYD to fundamental flaws in software and batteries. A ruinous price war, fueled by massive government subsidies and enormous overcapacity, is crippling not only the manufacturers but the entire supply chain – with direct consequences for product quality and profitability.
Even on Chinese social media and among leading industry figures, criticism is growing of a business model that prioritizes haste over craftsmanship and short-term market share over sustainable quality. This article examines the structural weaknesses of the Chinese electric car wunderkind and contrasts them with the traditional strengths of the German automotive industry: engineering expertise, brand trust, and a long-term quality strategy. It demonstrates why the race will not be decided solely on price and why prudence, rather than panic, is the right response to current market dynamics.
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Between price wars and profitability: How low-cost strategies are shaking the foundations of the automotive industry
While headlines in recent months have been dominated by the seemingly unstoppable expansion of Chinese electric car manufacturers, and German automakers are reportedly panicking, a closer look reveals a far more nuanced picture. Data-driven analysis of actual quality developments, market dynamics, and consumer behavior exposes structural weaknesses in the Chinese business model that extend far beyond short-term shifts in market share. The discrepancy between the aggressive market strategy of Chinese manufacturers and the increasing criticism of product quality on Chinese social media itself raises fundamental questions about the sustainability of the current growth model.
The quality crisis behind the facade of growth
The Chinese electric vehicle industry presents the world with an impressive growth scenario. In 2024, approximately 12.9 million electric or hybrid vehicles were sold in China, impressively demonstrating the market's dominance. However, behind these impressive figures lies a disturbing reality that is often overlooked in Western media. Data from JD Power, a global data analytics and consumer research company, paints an alarming picture: electric vehicles and plug-in hybrids in China currently have 226 problems per 100 vehicles, 14 more than combustion engine vehicles. Even more worrying is the trend. Since 2023, this figure has worsened by 37 percent.
These figures are not merely abstract statistics, but are concretely reflected in consumer experiences. Most problems occur precisely with the supposedly technologically advanced infotainment systems, in whose development the Chinese industry is internationally recognized as a pioneer. These systems alone account for 31 problems per 100 vehicles. This illustrates a fundamental discrepancy between the focus on rapid technological innovations and the lack of concentration on fundamental quality assurance. Manufacturers chase after innovative features while neglecting basic aspects of reliability and build quality.
The insurance industry serves as an unbiased indicator of the true state of quality. According to a detailed analysis published in January by the Chinese publication OFweek, insurers have lost 5.7 billion yuan (approximately 802 million US dollars) on electric vehicle policies. These losses occur despite the fact that insurers charge 20 to 100 percent more for electric vehicles than for models with combustion engines. The average labor time for repairs on electric vehicles is 3.04 hours, while for combustion engine vehicles it is only 1.66 hours. The reason given is the complexity of the high-voltage systems and safety protocols, coupled with a severe shortage of qualified personnel in repair shops.
The quality problems are particularly dramatic in the battery systems themselves, the heart of every electric vehicle. In October 2025, the Chinese market leader BYD had to conduct the most extensive recall in its corporate history. Over 15,000 vehicles of the Tang and Yuan Pro series were affected by serious safety defects. In the Tang models, design flaws can lead to malfunctions of the drive motor controller, while in the Yuan Pro vehicles, improperly installed battery seals pose a significant safety risk. This was by no means an isolated incident. As early as September 2024, BYD had to recall nearly 97,000 vehicles due to defective steering units, and in January 2025, a further 6,843 SUVs due to fire risks.
This spate of recalls raises critical questions about quality assurance, especially at a time when BYD is accelerating its global expansion and has overtaken Tesla as the world's largest electric vehicle manufacturer. The recalls not only damage the company's image but also incur significant costs in a market already characterized by extreme price pressure. The quality issues are not limited to BYD. According to the Economic Information Daily, a newspaper of the Chinese news agency Xinhua, VW partner XPeng attempted to secretly repair a faulty power steering system in nearly 70 percent of its sold vehicles to avoid a recall. This recall was ultimately necessary in September. Such practices fundamentally undermine consumer confidence and demonstrate that many manufacturers prioritize cost minimization and market share gains over long-term quality assurance.
The ruinous price war and its consequences
The Chinese electric vehicle market is dominated by a ruinous price war fueled by massive overcapacity. The Chinese auto industry can produce almost twice as many cars as are actually sold. Factories are operating at only 49.5 percent capacity, while 3.5 million unsold cars sit in storage. This structural overproduction is the result of years of government subsidies at both the central and local levels, which have fueled an uncontrolled expansion of production capacity. The result is a vicious cycle: those who want to utilize their production lines lower prices, which in turn forces other manufacturers to cut prices as well.
Electric car manufacturer BYD has cut prices on several models by up to 34 percent since the beginning of 2025. This aggressive pricing strategy has drawn sharp criticism even within the Chinese auto industry. Klaus Zyciora, chief designer and board member of state-owned automaker Changan and a former Volkswagen manager, described BYD's behavior as suicidal. He accused the company of attempting to achieve a monopoly. Yin Tongyue, president of automaker Chery, also strongly criticized the price war, comparing it to drinking poison to quench one's thirst. Geely founder Li Shufu appealed to the industry to respect industrial regulations and warned of significant overcapacity. He announced that his company would no longer build new plants or expand existing capacity to avoid further exacerbating overproduction.
These statements are remarkable, as the Chinese government has so far brusquely rejected the mostly Western accusations of overcapacity in China. The fact that leading Chinese industrial players are now themselves warning of the dangers underscores the seriousness of the situation. In China's automotive industry, the buzzword "Neijuan" is currently circulating, which can be loosely translated as "vicious cycle." The term describes the downward spiral of overcapacity, price reductions, and shrinking margins, which ultimately weakens all market participants instead of strengthening the industry.
Price pressure has a direct impact on the entire value chain. Many suppliers to Chinese automakers have to wait a long time for payment. Currently, it takes six to eight months for suppliers to be paid. Outstanding receivables in the industry amount to around 400 billion yuan, which is equivalent to about 50 billion euros. The poor payment practices of market leader BYD are particularly notorious. According to industry representatives, the company sometimes only pays its suppliers after a year. Given the company's already high debt, this is a questionable practice. Suppliers' profit margins are around two percent. When automakers then demand price reductions of ten percent from them, it is clear that this can only come at the expense of product quality.
Experts also see a risk that the price war will ultimately lead to a decline in vehicle quality. In recent years, the price of some models has almost halved, from 230,000 to 120,000 yuan. It is impossible to reduce the price of an industrial product by 100,000 yuan and still guarantee quality. This assessment is impressively confirmed by the already documented quality problems and the increasing number of recalls. Focusing on aggressive price reductions while neglecting quality control is a strategy that may gain market share in the short term, but in the long run undermines consumer confidence and the sustainability of the entire industry.
The financial fragility of many Chinese electric vehicle manufacturers is also evident in their profitability. While BYD is still operating relatively profitably, albeit with declining margins, other major players like Nio and XPeng continue to post massive losses. Nio recorded a net loss of 6.75 billion yuan in the first quarter of 2025 on revenues of 12.03 billion yuan, representing a worrying net margin of minus 56 percent. Even XPeng, which recently boasted strong revenue growth, only recently achieved a modest vehicle margin of 14.3 percent. The question remains how long investors will be willing to finance these ongoing losses while price pressures continue to intensify.
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Voices from Chinese social media
Particularly revealing is a look at the discussions on Chinese social media itself, which paint a far more nuanced and often critical picture of the domestic electric vehicle industry than is frequently perceived in Western reporting. On platforms like Weibo, China's equivalent of Twitter, Xiaohongshu (the so-called Little Red Book), and other networks, numerous posts from consumers share their negative experiences with Chinese electric vehicles. These voices reveal not only specific quality problems but also a growing frustration with the discrepancy between marketing promises and actual product quality.
Consumers report poor workmanship, immature software systems, battery performance issues, and unreliable driver assistance systems. A recurring theme is the aggressive pricing strategy, which leaves previous buyers feeling cheated when their vehicles, purchased just months earlier, are suddenly offered at drastically reduced prices. This practice, for example, led to a flood of complaints on a well-known Chinese automotive quality portal after BYD launched new models with self-driving capabilities at significantly lower prices. Buyers of earlier versions felt shortchanged and protested vehemently.
The Chinese government has already responded to the growing criticism. It tightened oversight of the industry and attempted to regulate price wars. The heads of over a dozen automakers, including BYD, Geely, and Xiaomi, were summoned to Beijing. The message was clear: no sales below cost, no unreasonable price cuts. The government also cracked down on misleading marketing. Many manufacturers employ so-called "internet water armies," groups that, for a fee, praise one brand and criticize others. The government has been trying to put an end to this practice of misleading marketing for several months as part of its anti-price-war offensive.
While censorship practices in China make a full and open discussion about the problems facing the domestic auto industry difficult, analyses by the University of Hong Kong revealed that ten times more comments than usual were deleted on Weibo after the Tianjin explosion, demonstrating the authorities' sensitivity to criticism. Nevertheless, critical voices repeatedly manage to circumvent censorship, at least temporarily. On Chinese social media, netizens are highly creative in their efforts to bypass the censorship apparatus. While sensitive topics are censored in real time, other topics manage to bypass this, at least temporarily, and are shared millions of times.
In China, there's a strong awareness that one shouldn't be the first to publicly share a controversial opinion. It's a well-known fact that the first to voice a dissenting opinion always comes back to haunt them. Many in China have therefore experienced that open criticism is possible as long as it remains private. This often leads to dissatisfaction being expressed in private chat groups, encrypted forums, or coded messages that are difficult for outsiders to decipher. Nevertheless, the very existence of this criticism is a clear indicator that the quality issues within China's electric vehicle industry are indeed being noticed and discussed by consumers within the country itself.
It is particularly noteworthy that even in this censored environment, the issue of product quality and safety in electric vehicles is so prominent that the government has been forced to intervene with regulations. In March 2025, an electric vehicle driver was killed in an accident in China, sparking discussions about the safety of electric cars. The Chinese government responded immediately with stricter safety standards for electric vehicle batteries. The Ministry of Industry and Information Technology introduced stricter regulations that will impose higher safety requirements on battery systems in the future. These measures are an implicit admission that the previous standards were insufficient and that the rapid expansion of the electric vehicle industry has come at the expense of safety.
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China's electric car crisis: Who will win the upcoming consolidation – Why trust in German cars strengthens trust
The unbridgeable gap between mass and class
A fundamental economic principle often overlooked in the current debate is the distinction between cost leadership and differentiation strategies. Chinese electric vehicle manufacturers have clearly chosen the path of cost leadership, supported by massive government subsidies, vertical integration, and economies of scale. BYD, for example, produces over 90 percent of its own batteries and benefited massively from the 90 percent drop in lithium prices, from 72,000 to 7,200 euros per ton. These cost advantages allow BYD to lower prices and still remain profitable, at least in the short term.
German car manufacturers, on the other hand, have historically positioned themselves through differentiation. Their competitive advantages lie not primarily in price, but in quality, engineering, brand prestige, durability, and customer service. For more than a century, diligence, precision, and efficiency have been the hallmarks of German engineering. These values are deeply ingrained in the DNA of companies like Continental, Mercedes-Benz, BMW, Volkswagen, and Audi. German engineering and precision are not only legendary, but also state-of-the-art. In product development, precision down to the smallest component is essential.
This fundamental strategic distinction has far-reaching implications. A cost leader must constantly offer the lowest price in the market to defend its position. This leads to a race to the bottom, eroding margins and ultimately weakening the ability to invest in quality and innovation. A differentiator, on the other hand, can charge premium prices as long as it creates perceptible added value for customers. This added value might lie in superior quality, better reliability, a prestigious brand image, or outstanding customer service.
The challenge for Chinese manufacturers lies in their attempt to pursue two strategies simultaneously. On the one hand, they want to gain market share through low prices, while on the other hand, they also want to be perceived as technologically advanced and producing high-quality vehicles. This dual strategy is extremely difficult to implement economically and often leads to compromises that manifest themselves in the documented quality problems. The question is whether Chinese manufacturers can ultimately break out of the cost trap and establish genuine premium brands, or whether they will remain permanently stuck in the low-cost mass-market vehicle segment.
Recent survey data suggests that the perception of German brands remains robust despite all the challenges. According to a recent survey by mobile.de in the summer of 2024, more than a third (6.6 percent) of drivers see no advantage in Chinese electric cars compared to established brands. Further reasons for this reluctance include a preference for supporting the German automotive industry (32.2 percent), greater trust in Western car brands (29.8 percent), or concerns about a shortage of spare parts (20 percent). The limited dealer network and doubts about the quality and safety of Chinese vehicles are additional factors contributing to this cautious purchasing behavior.
Particularly noteworthy is a global study showing that German electric cars enjoy a high level of trust worldwide. German car brands like Mercedes, BMW, and VW are considered especially reliable globally, even when it comes to electric vehicles. Consumers in key markets trust the quality of German electric cars more than vehicles from China or the USA. Even in China, the home market of Chinese manufacturers, BYD leads the ranking, albeit by a narrow margin. Mercedes-Benz, BMW, Volkswagen, and Porsche follow closely behind. These brands are significantly ahead of other Chinese manufacturers or Tesla. In the USA, Honda takes first place, and here too, German brands like Mercedes and BMW are strongly represented.
This data is of enormous strategic importance. It demonstrates that the trust capital of German brands, built up over decades, does not disappear overnight, but rather represents a lasting resource of inestimable value in an increasingly quality-conscious market environment. While Chinese manufacturers are aggressively pursuing volume growth and market share gains, German manufacturers possess an asset that cannot simply be copied or substituted with lower prices: brand loyalty and perceived quality.
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The psychology of brand loyalty and the phenomenon of buyer remorse
The psychology behind brand preferences in the automotive industry is complex and shaped by trust, experience, emotions, and social influences. A crucial factor is trust. Consumers want to be sure that the products they buy are reliable. When a brand is perceived as trustworthy, consumers are more likely to choose familiar products, even if they are more expensive. Personal experience with a brand is also significant. Those who have already had positive experiences with a product or brand generally remain loyal. Repeated positive experiences lead consumers to continue trusting the same brand.
A recent study by Asahi Kasei on brand loyalty and purchasing behavior of car users in the four major automotive markets of China, Germany, the USA, and Japan reveals interesting trends. The results confirm that, given intensifying competition, new manufacturers, and changing customer needs, brand loyalty is fluctuating worldwide. More than half of those surveyed in Germany and the USA plan to switch brands when buying their next car. Customers in China, in particular, are remarkably open to changing car brands: 79 percent stated that they would opt for a model from a different manufacturer.
This seemingly low brand loyalty in China is a double-edged sword for Chinese manufacturers. On the one hand, it offers opportunities for new brands to gain market share. On the other hand, it means that loyalty to Chinese brands is also low. Consumers who buy a BYD today could easily switch to Nio, XPeng, Geely, or another brand tomorrow if it offers a more attractive deal. This leads to constant competition for every single customer and prevents the development of the kind of long-term brand loyalty that is crucial for sustainable profitability.
In Germany, however, the picture is different. Despite the challenges posed by new competitors and technologies, the preference for domestic brands remains strong. The YouGov ranking of the most popular car brands in Germany shows a clear dominance of German manufacturers. Audi leads with a score of 25.1, followed by BMW with 24.4 and Mercedes-Benz with 23.9. Volkswagen comes in fourth with 20.3 points. These scores are based on evaluation dimensions such as quality, value for money, overall impression, willingness to recommend, employer image, and customer satisfaction.
Crucially, quality is cited as an important factor for switching car brands in Germany and the USA, while in China, the desire to try something new is the primary motivation. This points to differing consumption patterns. German and American consumers are primarily quality-oriented and switch brands when they are dissatisfied with the quality or expect better. Chinese consumers, on the other hand, are more experimental and status-conscious, leading to greater volatility in market share.
For Chinese manufacturers, this means they must not only gain customer trust once, but continuously reinforce it through consistent quality and positive experiences. Every quality issue, every recall, every negative experience not only jeopardizes the loyalty of the affected customer, but also, through word of mouth and social media, damages the perception of potential new customers. In a market with low baseline loyalty and high churn, quality is not just a differentiating factor, but an existential necessity.
The massive recalls and quality problems of Chinese manufacturers have already led to measurable buyer remorse. Complaints from customers who feel cheated are piling up on Chinese consumer portals. Especially after drastic price reductions, previous buyers feel disadvantaged, as their vehicles have suddenly become significantly less valuable. These negative experiences shape perceptions and may lead affected customers to opt for established brands with more stable prices and higher resale value when purchasing their next car.
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The inevitable consolidation and its winners
The structural problems of the Chinese electric vehicle market—massive overcapacity, ruinous price competition, quality issues, and a lack of profitability at many manufacturers—make industry consolidation inevitable. Experts unanimously predict that of the more than one hundred currently active Chinese car brands, only a handful will survive. The Chinese government has summoned the heads of over a dozen automakers to Beijing to try to curb the irrational competition. Consolidation is unavoidable. Of the one hundred and twenty electric vehicle brands, probably no more than ten will survive.
This consolidation is by no means just a theoretical possibility; it has already begun. Many smaller manufacturers are struggling with a severe lack of capital, quality issues, and difficulties adapting to rising consumer demands for comfort. The transition from prototype-quality microcars to the high-quality electric vehicles that customers are demanding is proving extremely difficult for many Chinese manufacturers. As a result, many companies like Hozon or Future Mobility can only sell a few hundred vehicles per year. This is far too few to remain competitive in the long term.
The consolidation is expected to favor the largest and financially strongest players, particularly BYD, Geely, and possibly a few others. However, even these market leaders are not immune to the challenges. BYD reported a 30 percent drop in profit to 6.37 billion yuan in the second quarter of 2025, despite a 14 percent increase in revenue to 201 billion yuan. Profit margins are thus eroding even for the market leader, calling into question the sustainability of its current business model.
Interestingly, consolidation will likely also create opportunities for international manufacturers with strong brands, technological expertise, and financial stability. In a consolidated market with fewer Chinese manufacturers and lessening price competition, quality and brand prestige could regain importance. German manufacturers currently under pressure in China could benefit from this development, provided they use the time to adapt their product range to Chinese customer needs and improve their technological competitiveness, particularly in software and automated driving.
Volkswagen has already taken initial steps in this direction with its "In China for China" strategy. The company is cooperating with the Chinese electric car manufacturer XPeng and plans to launch more than twenty new models specifically for the Chinese market by 2027. Furthermore, VW is investing in the development of its own chip for autonomous driving together with the Chinese AI start-up Horizon Robotics. This high-performance processor will process data from cameras and sensors in real time to control advanced driver assistance systems and automated driving functions. The first vehicles with these systems are expected in 2026.
Mercedes-Benz also plans to score points with advanced battery technology. The new electric CLA is to be equipped with a solid-state battery that achieves an extremely high energy density and offers a range of up to 750 kilometers. This technology enables fast charging, providing enough energy for 300 kilometers in just five minutes. This would give Mercedes a significant technological advantage that even its Chinese competitors cannot currently match.
These examples show that German manufacturers have by no means given up, but are instead taking strategic and technological countermeasures. They are combining their traditional strengths in quality and engineering with new partnerships and technologies to remain competitive. The question is not whether German manufacturers can survive in China, but whether they can adapt quickly enough and leverage their differentiation advantages before losing too much market share.
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The innovative power of German engineering
An often overlooked aspect in the debate about the supposed superiority of Chinese electric car manufacturers is the still impressive innovative strength of the German automotive industry. From 2022 to 2026, German automotive manufacturers and suppliers invested more than 220 billion euros in electromobility, including battery technology, digitalization, and other research areas. This equates to more than 44 billion euros annually. Between 2025 and 2029, a total of 320 billion euros was earmarked for innovation. In addition, approximately 220 billion euros were invested in capital goods, particularly in modern production facilities.
These investments reflect the commitment to enabling climate-neutral mobility as quickly as possible and to continuing to produce the world's safest, most efficient, and highest-quality climate-neutral vehicles for all segments. The innovative strength of German automotive companies is unparalleled worldwide. Germany remains a global leader in patents. German companies are the leading source of European patent applications and rank second globally. Even in computer technology and artificial intelligence, German companies rank third globally, behind the USA and China. They are also experiencing strong patent growth in these areas, exceeding twelve percent.
These figures prove that the claim that German manufacturers have fallen behind technologically is unfounded. The present analysis shows that the German automotive industry has now caught up in green drive technologies and is capable of developing technologically competitive electric cars. The key now is to effectively scale up production and bring innovations to market promptly. The challenge lies not in the capacity for innovation itself, but in the speed of implementation and adaptation to rapidly changing market needs.
One area where German manufacturers have traditionally excelled is safety. Chinese electric vehicles also often achieve top marks in crash tests; for example, the Wey Coffee einundzero and the Ora Funky Cat each received five stars in the Euro NCAP crash test. However, long-term reliability, durability over many years, and resale value are areas in which German vehicles have historically been superior and are expected to remain so. Building a vehicle that performs well in the first year is one thing. Building a vehicle that still runs reliably after ten years and 200,000 kilometers is a completely different challenge.
The German automotive industry has spent decades developing and refining processes, materials, and systems that guarantee precisely this longevity. Experience with millions of vehicles over decades, knowledge of wear mechanisms, mastery of complex manufacturing processes, and established quality assurance systems are assets that cannot simply be copied. They are the result of a lengthy learning process that cannot be shortened by any government subsidy.
Another often underestimated factor is the service network. German manufacturers have a globally established network of workshops, spare parts depots, and trained personnel. For buyers, the assurance of receiving quick and reliable support in the event of a problem is a crucial aspect of their purchasing decision. Good service and the availability of spare parts are among the most important criteria for car buyers. Chinese manufacturers still need to build this network, which takes years and requires significant investment. In the meantime, uncertainty about what happens in the event of a warranty claim or how the vehicle will retain its value remains a significant obstacle to purchase.
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Why Chinese electric cars aren't overrunning Germany
The reality beyond the headlines
The panic attributed to German automakers in the face of Chinese competition appears exaggerated upon closer inspection. Of course, German manufacturers face considerable challenges. The Chinese market, long considered a goldmine, has fundamentally changed. German manufacturers are losing market share there, particularly in the electric vehicle segment. In 2024, Volkswagen's market share for electric vehicles in China had fallen to just two percent, while its overall market share dropped to 12.1 percent. BMW and Mercedes are struggling with sales declines of sometimes over twenty percent.
But this development does not signify the end of the German automotive industry. Rather, it is a market adjustment after years of unusually high market shares. The Chinese market is naturally developing a stronger preference for domestic brands, a phenomenon observed in almost all industries and countries as soon as the local industry becomes competitive. Even more importantly, it is crucial to understand that the Chinese are incredibly proud of the progress made by the domestic automotive industry, and driving a domestic product is absolutely fashionable. This trend is irreversible. The Chinese are now buying with a patriotic mindset.
This patriotic preference, however, has its limits, defined by quality. As long as Chinese manufacturers deliver high-quality products, they will benefit from this preference. But as soon as quality problems become widespread, warranties are not honored, or vehicles fail to retain their value, this loyalty will quickly erode. The already documented low brand loyalty in China—seventy-nine percent of respondents are open to switching brands—means that consumers will readily switch to other manufacturers, including international ones, if dissatisfied.
Outside of China, the picture is considerably more nuanced. In Europe, Chinese electric cars have yet to achieve a breakthrough. The market share of Chinese electric vehicles in Europe has declined, and sales figures are falling short of expectations. Chinese brands like BYD and Nio are struggling with excessively high prices, a lack of added value, and inadequate infrastructure. Furthermore, EU tariffs are putting a strain on Chinese manufacturers. Despite their potential, they need to improve to compete with established brands. In Germany, 39 percent of respondents, particularly younger generations, are generally considering Chinese car brands. Conversely, this means that 61 percent are not considering Chinese brands.
The reasons for this reluctance are manifold. 63.6 percent of drivers see no advantage to Chinese electric cars over established brands. 33.2 percent prefer to support the German automotive industry, 29.8 percent trust Western car brands, and 20 percent fear a shortage of spare parts. These factors are not temporary reservations but reflect deep-seated concerns regarding quality, reliability, and service infrastructure. To overcome these concerns, Chinese manufacturers must not only impress in the short term but also build trust over many years through consistent quality and reliable service.
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The future belongs to quality, not price.
The central thesis emerging from the comprehensive data analysis is clear: cheap products may sell quickly, but quality wins loyalty. The short-term success of Chinese electric car manufacturers, measured in sales figures and market share, is undeniable. However, this success is primarily based on aggressive pricing strategies, government subsidies, and the exploitation of a huge domestic market. The sustainability of this model, however, is questionable, as the documented quality problems, the profitability crisis, and the impending consolidation demonstrate.
Even Chinese consumers will eventually realize this, as stated in the original statement. Discussions on Chinese social media, complaints on consumer portals, the increasing number of recalls, and consumer reactions to quality issues are early indications that consumer focus is shifting from pure price considerations to quality and reliability. This shift is being accelerated by natural market developments: early buyers were enthusiasts willing to take risks. The general consumer base is more conservative and places greater value on proven quality.
German brands should therefore focus on their true strength, which is based on decades of craftsmanship, innovation, and brand value—something no startup can replicate overnight. These strengths are not abstract but manifest themselves in measurable advantages: greater reliability over the vehicle's lifetime, better resale value, a more comprehensive service network, more advanced safety systems proven over time, and superior material quality. While Chinese manufacturers have made impressive strides in software and digital features, fundamental aspects such as build quality, durability, and reliability remain areas where German manufacturers continue to lead the way.
Economic literature clearly shows that markets initially dominated by price wars evolve over time toward quality competition as consumers become wealthier and more demanding. China is undergoing precisely this transition. The Chinese middle class is growing, income levels are rising, and consequently, so are expectations regarding product quality. The era in which Chinese consumers primarily bought based on price is drawing to a close. Today's Chinese consumers expect state-of-the-art technology, superior craftsmanship, comprehensive warranties, and excellent customer service. They are no longer willing to compromise on quality for lower prices.
For German manufacturers, this means that their traditional strengths will be more highly valued in the future, provided they remain competitive in the electric vehicle and digital vehicle segments. Investments of over €320 billion in innovation by 2029 are a clear signal that German manufacturers are embracing this challenge. Crucially, these innovations will need to be brought to market quickly, and the message of German quality and reliability will be credibly conveyed in the age of electromobility.
Another strategic advantage of German manufacturers lies in their global presence and diversification. While Chinese manufacturers are heavily dependent on the domestic market and are only just beginning their international expansion, German manufacturers are established in all major markets worldwide. This offers not only risk diversification but also access to diverse customer segments and technological trends. The ability to develop vehicles that meet both stringent European emissions standards and customer preferences in China, the USA, and other markets is a skill honed over decades.
The long road to brand establishment
An often underestimated factor in the automotive industry is the time it takes to truly establish a brand. Brands like Mercedes-Benz, BMW, and Volkswagen have existed for over a century. They have survived wars, economic crises, oil shocks, and numerous technological upheavals. This longevity fosters trust. Consumers know that these companies will continue to exist in the future to honor warranties, supply spare parts, and provide service. Chinese brands, even the largest like BYD, have only existed in their current form for a few years. The question of whether they will still exist in ten or twenty years remains unanswered for many consumers.
Automotive history is full of manufacturers that rose to spectacular heights and failed just as spectacularly. In the US, dozens of car brands disappeared during the 20th century. In Japan and Korea, only a few of the numerous manufacturers that launched in the 1960s and 70s survived. There is no reason to believe that the Chinese automotive industry will be exempt from this pattern. The consolidation already underway, with only five to ten of over one hundred brands expected to survive, confirms this historical rule.
For consumers buying a vehicle they might drive for ten years or more, this uncertainty is a significant factor. Am I buying a vehicle from a manufacturer that might not even exist in five years? What will happen to warranties, spare parts, and software updates then? These concerns are rational and are further compounded by the documented financial fragility of many Chinese manufacturers, massive losses at Nio, XPeng, and others, and strained payment relationships in the supply chain.
German manufacturers, on the other hand, offer stability and continuity. They have proven their ability to adapt to fundamental technological shifts, from horse-drawn carriages to automobiles, from carburetors to fuel injection, from mechanical to electronic systems. The current transformation to electromobility is undoubtedly challenging, but it is by no means the first fundamental transformation these companies have had to manage. This historical perspective and proven adaptability are values that are not captured in short-term market share analyses, but are crucial for long-term competitiveness.
The strategic reassessment of the China business
The analysis reveals a need for German automakers to strategically reassess their business in China. The days when China was primarily viewed as a growth market and source of profit are over. China is now a highly competitive market where local manufacturers possess significant competitive advantages, including government support, lower cost structures, faster development cycles, and a home-field advantage in terms of customer preferences. German manufacturers will never again achieve the market shares in China that they enjoyed during the boom years.
This does not mean, however, that China should be abandoned as a market. On the contrary, China remains the world's largest automotive market and an important testing ground for new technologies, particularly in the areas of autonomous driving and digital services. The strategy, however, needs to be fundamentally adapted. Instead of trying to compete with Chinese manufacturers in the mass market and on price, German manufacturers should focus on premium segments where quality, brand prestige, and technological excellence are valued and rewarded.
Relocating development centers to China, as Volkswagen and Mercedes are already doing, is a step in the right direction. To be competitive in China, vehicles must be developed that are specifically tailored to Chinese customer needs. This applies not only to external design aspects but also to fundamental product characteristics such as size, digital features, connectivity, and integration into the Chinese digital ecosystem. Cooperation with local technology companies, such as Volkswagen's partnership with Horizon Robotics for chips or with XPeng for electric vehicle platforms, also makes sense in order to shorten development times and leverage local expertise.
At the same time, German manufacturers must leverage their global diversification as a strategic advantage. Over-reliance on a single market, even one as large as China, carries significant risks, as recent developments demonstrate. A balanced global presence, in which no single market accounts for more than a third of total sales, provides resilience to local market disruptions. The European market, the North American market, and emerging markets in other regions together offer a volume comparable to China, and in which German brands remain strongly positioned.
Calmness instead of panic
A comprehensive analysis of the available data paints a far more nuanced picture than the often sensationalist headlines about the alleged dominance of Chinese electric car manufacturers and the panic among German automakers. Chinese manufacturers have undoubtedly made impressive progress and conquered their domestic market. However, this success is based on a combination of massive government subsidies, aggressive pricing strategies, and home-field advantage. It is accompanied by significant quality problems, the financial fragility of many manufacturers, and an impending consolidation that will eliminate the majority of current market players.
German automakers face challenges, but are by no means on the brink of collapse. Their fundamental strengths – decades of experience in automotive production, globally recognized brands, superior quality and reliability, comprehensive service networks, and massive investments in innovation – remain intact. The transformation to electromobility is a challenge, but one that can and must be overcome. Investments exceeding 320 billion euros in the coming years demonstrate that the industry is taking this challenge seriously.
Instead of listening to the endless chorus of doomsayers, German brands should focus on their true strength. This strength doesn't lie in trying to undercut Chinese manufacturers on price—a battle that cannot be won—but in emphasizing the areas where they excel: quality, reliability, durability, and brand prestige. In a maturing market with increasingly demanding consumers, these are precisely the qualities that will be decisive. The massive quality problems of Chinese manufacturers, documented by 226 issues per 100 vehicles, rising recalls, and losses in the insurance industry, will sooner or later shake consumer confidence. When that moment arrives, brands with proven quality and reliability will be the winners.
The voices on Chinese social media mocking the poor quality of their own electric cars are an early indicator that this shift has already begun. Chinese consumers are not blind to the quality problems of their domestic manufacturers. For now, they are willing to accept them as long as the prices are right and national prestige is served. But this tolerance has its limits. As soon as vehicles break down, repairs become expensive, warranties are not honored, and resale value plummets, the willingness to stick with Chinese brands will rapidly decline.
Cheap may sell quickly, but quality wins loyalty. This insight is not new, but a fundamental economic truth that has proven itself time and again in industry after industry and market after market. There is no reason to assume that the automotive industry will be an exception to this rule. The Chinese electric vehicle industry is in a phase of hypergrowth and ruinous competition that is not sustainable in the long run. The inevitable consolidation will come, and with it a return to fundamental values such as quality, reliability, and customer satisfaction. German automakers, who have embodied these values for over a century, are well-positioned to benefit from this development, provided they remain level-headed, consistently invest in innovation, and confidently communicate their enduring strengths in an increasingly quality-conscious market environment.
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