Foreign carmakers turn to Chinese technology to remain relevant

Western carmakers are fighting to stay relevant in the world’s largest car market with new electric vehicles made with Chinese technology that they also want to bring to other international markets. 

Two years after brands including Volkswagen and Toyota outlined plans to regain market share via cars made with local knowhow under an “in China for China” strategy, executives are hoping to win over consumers with a slew of new products displayed at the annual auto show in Beijing this week. 

“We want to stabilise this year but we assume that with all the models . . . we will be able to grow again in China,” said Jochen Göller, a board member at BMW.

The German group will showcase its electric iX3 sport-utility vehicle with an extended chassis, which was developed in China using local technologies from Momenta, Huawei and Alibaba. 

Foreign carmakers have significantly lost sales in China in recent years with the rise of domestic rivals and new players such as BYD, Geely and Xiaomi in a market where EVs and plug-in hybrids now account for more than half of new car sales.

Their share in China has halved to 32 per cent this year from 64 per cent in 2020, according to data from Shanghai consultancy Automobility.

After decades of Chinese brands learning car manufacturing from their western rivals through their local joint ventures, the tables have turned, forcing VW, Toyota and others to rely on Chinese partners and supply chains to build cars faster and with advanced software.

“We are so big in China, we can’t walk away,” VW’s brand sales chief Martin Sander said at an industry event in London last month. 

While Europe’s largest carmaker, which includes the Porsche and Audi brands, has long manufactured vehicles locally, it is also designing and developing its vehicles in China. “Because we just see what we’ve been doing in Europe for a long period of time is not competitive in the Chinese market,” Sander added. 

Following an overhaul in their strategies, early signs of improvement have emerged, although analysts warn that longer-term growth is far from assured.

“They’re doing all the right things but . . . I am not confident that the products coming out will help the Europeans find the bottom,” said Tu Le, founder of consultancy Sino Auto Insights.

VW overtook Geely and BYD to reclaim the top position with a market share of 13 per cent in the first three months of 2026, Automobility data showed. This was mainly on the back of declining sales of EVs for domestic players as many Chinese government subsidies ended last year.

The German brand, whose vehicles are still predominantly powered by the combustion engine, plans to launch 13 plug-in hybrid and EV models in China alone this year.

“We are also looking into opportunities of bringing these vehicles into other parts of the world in order to face the competition,” Sander said. 

Audi fell victim to the broader softening EV demand. Last year, it launched the E5 Sportback, its China-only sub-brand without its signature four-ring logo. But it had to offer heavy discounts to the model, which was co-developed with its Chinese partner SAIC, early this year to bolster demand.

“We need some time to really ramp up the brand and the sales volume,” Audi chief executive Gernot Döllner said in an interview, adding that two models will follow the E5.

Following a $5bn writedown in late 2024, General Motors said its China business was now generating profits with hybrids and EVs accounting for more than half of its sales. But as it focuses on higher-margin models, its first-quarter sales in China have declined 21 per cent. 

Nissan will also aim to lift combined sales in China and exports from the country to 1mn units by 2030, up from 660,000 last year.

To do so, the Japanese group will collaborate further with its Chinese joint venture partner Dongfeng to bring the battery-powered N7 to Latin America and south-east Asia and the plug-in hybrid Frontier Pro pick-up truck to those two markets and the Gulf. 

“China becomes a global innovation and export hub,” said Guillaume Cartier, Nissan’s chief performance officer. 

Le said one risk was cannibalisation if lower-cost Chinese models eroded demand for vehicles produced elsewhere. But joint venture car plants in China operated by VW, Toyota and Nissan are also underutilised. “The alternative to not exporting is closing factories in China,” he warned.

Chris Liu, a Shanghai-based EV analyst with consultancy Omdia, said the real gap for foreign automakers in China was no longer hardware or even EV platforms, but software execution, and “that is fundamentally a talent problem”. 

“China offers a scale of software engineering talent that is difficult to replicate, both in volume and in iteration speed,” Liu said, adding that is the reason why German automakers in particular are deepening their research and development presence in China. 

“As long as foreign automakers can attract top software talent in China, they stay relevant. But staying competitive depends on whether they can actually operate at China’s development speed, not just participate in the talent market.”