Overview
- Deliveries plunged in the first half of 2026, with BMW down about 20 percent and Mercedes down about 28 percent in China, prompting companies to cut full‑year profit guidance and tighten cost plans.
- Volkswagen has already closed or sold five Chinese plants, trimming roughly one million units of capacity and planning further cuts as it restructures its local footprint.
- Firms are pursuing two tracks: building China‑specific R&D and model programs to better match local tastes and rules while relocating production and investment to lower‑cost Eastern Europe, notably new and expanded plants in Hungary.
- Management measures to restore competitiveness include faster local development, deeper partnerships with Chinese firms and proposals to raise productivity in Germany, which have triggered strong union opposition and political debate over industrial policy.
- The shift reflects a broader market change: Chinese makers lead the EV transition, exported more than 5 million cars in H1 2026, and their scale, price advantage and policy shifts have reshaped the competitive landscape for global premium brands.