China’s Luxury Passenger Vehicle Market in 2025

The Chinese luxury passenger vehicle market, previously led by European brands, reached a turning point in 2025. Chinese brands grew 45.8% year-on-year to 2.45 million units, surpassing European brands (2.03 million units), which had held the top spot for many years. In 2019, European brands accounted for over 80% of the market share, highly valued for their brand prestige and the performance of their internal combustion engine vehicles (ICEVs). At that time, American and Japanese brands each held just under 10%, while Chinese brands accounted for only 1.2%. Supported by the Chinese government’s purchase incentives for new energy vehicles (NEVs), Chinese manufacturers expanded their NEV offerings. Consequently, the criteria for purchasing luxury cars shifted from traditional brand loyalty to advanced features, such as driver assistance technologies that reduce fatigue, multiple display setups, and comprehensive digital cockpit functions. In 2025’s market where battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) made up 51.6% of total passenger car shipments, European brands remained heavily reliant on ICEVs (92.7%). As a result, brands like Mercedes-Benz, BMW, and Audi lost market share to Chinese brands like AITO, Xiaomi, Li Auto, and XPeng, which quickly adapted to local consumer needs with their BEV and PHEV (including REEV) models. While sales of American ICEVs declined, Tesla’s BEVs—highly popular in major cities—served as a growth foundation, allowing American brands to maintain third place with a 14.1% market share in 2025. Despite the overall decline in demand for foreign brands, Japan’s Lexus remained steady. From 2025 onward, as trade-in subsidies were extended to ICEVs, Lexus gained support due to its fuel efficiency, brand value, and high resale value.