Foreign carmakers confront China’s electric vehicle dominance at Auto Shanghai

Global automakers look to reclaim ground as Chinese EV giants push innovation and price wars.

People gather outside the National Exhibition and Convention Center, the venue for the upcoming 21st Shanghai International Automobile Industry Exhibition, in Shanghai on April 21, 2025. Photo by Hector Retamal/AFP

By Anna Fadiah and Hayu Andini

As Auto Shanghai 2025 opens its doors this week, foreign carmakers are preparing for a high-stakes showdown. The world's largest auto show, running until May 2, showcases China’s electric vehicle dominance like never before. With the rise of smart EVs and artificial intelligence-powered technologies, foreign brands are facing mounting pressure to prove they can compete on China's cutting-edge automotive frontier.

This year’s event is unfolding against the backdrop of China’s increasingly influential role in global automotive trends. The country’s commitment to developing electric and hybrid vehicles, backed by years of state support, has vaulted it to the forefront of the industry. In 2024, electric vehicles (EVs) accounted for 26 percent of all car sales in China, with hybrids contributing an additional 19 percent, according to research firm Inovev.

"China is the only country where you see industrial heavyweights coexisting with agile startups, combining scale with innovation," said Guillaume Crunelle, an auto industry analyst at Deloitte, speaking to AFP.

From startups to tech giants, China dominates Auto Shanghai

Auto Shanghai 2025 features a dizzying array of EV and smart car launches, with dozens of domestic brands presenting new electric SUVs, sedans, and multi-purpose vehicles. The sheer diversity reflects the country’s uniquely aggressive development timeline — new models are designed, built, and launched at lightning speed.

Participants range from established state-owned players to nimble startups like Xpeng and Li Auto. Major technology firms including Huawei and Xiaomi, traditionally associated with smartphones and consumer electronics, are also carving out space in the auto sector. Their entries signal a broader convergence of tech and transportation.

The Chinese market is not only the largest in the world but also one of the youngest and most tech-savvy. Local consumers embrace innovation at a rapid pace, making it fertile ground for EV experimentation. However, this dynamism comes at a cost — the competition is ruthless. Price wars have erupted, forcing even major players like BYD, Geely, and SAIC Motor to slash prices to retain market share.

Analysts believe the Chinese government is subtly pushing for consolidation within the sector. Reports suggest two major state-owned car companies are planning a merger, a move aimed at streamlining operations and strengthening China's position in the global auto arena.

“They’re entering a rationalisation phase steered by the state to drive efficiency and global competitiveness,” Crunelle explained.

Overseas expansion and strategic shifts

Many Chinese automakers are also turning their gaze outward, eyeing growth in Southeast Asia, Latin America, and Europe. Overseas sales are increasingly seen as a way to sustain operations and diversify risk, especially as the domestic market becomes saturated.

For foreign brands, however, China remains essential — yet increasingly elusive. No group has felt the shift more acutely than the German automakers.

German brands fall behind in the Chinese EV market

Once dominant in China, German carmakers like Volkswagen, BMW, and Mercedes-Benz have seen their star dim as local competitors rise. At this year’s Auto Shanghai, Volkswagen is attempting a comeback by unveiling three new models developed exclusively for the Chinese market — a first for the group.

Volkswagen is also introducing a new autonomous driving system aimed at catering to China's tech-forward consumers. Ralf Brandstätter, the company’s head of China operations, recently told German media that foreign manufacturers still hold potential in the market, especially as Beijing re-emphasizes the importance of foreign investment during an economic slowdown.

Despite aggressive competition and ongoing price wars, Volkswagen has opted for a profitability-first approach. Brandstätter acknowledged that the group was willing to sacrifice sales volume and market share in order to stay financially viable.

Strategic partnerships are also playing a role in these efforts. Volkswagen’s tie-up with Xpeng is expected to lower production costs and inject new energy into its product pipeline.

Auto analyst Stefan Bratzel said German carmakers will need to do more than just participate — they will have to lead innovation if they want to retain even a modest foothold in China.

“They have to prove they’re at the forefront of technological development. Otherwise, holding onto their current market share will become impossible,” Bratzel told AFP.

Former Porsche CFO Lutz Meschke has echoed this sentiment, stating bluntly that Germany's carmakers have already lost the dominance they once held in China.

Global tensions and Tesla’s absence

Adding to the complications, geopolitical tensions are further unsettling the industry. U.S. President Donald Trump’s threat to impose steep tariffs on European goods has rattled international companies, especially those straddling the U.S. and Chinese markets.

Bilateral tensions between Washington and Beijing have also escalated, with mutual tariffs remaining stubbornly high. One notable absence at Auto Shanghai this year is Tesla, despite its massive footprint in China, including two large-scale factories in Shanghai.

Tesla has not participated in a major Chinese auto show since 2021, when a viral protest involving a customer’s brake failure complaint caused a public relations crisis. The brand’s no-show this year has raised eyebrows, though other American manufacturers like Cadillac, Buick, and Lincoln will still attend, showcasing models built and sold locally.

The road ahead for foreign carmakers in China

The Auto Shanghai 2025 exhibition makes one thing clear: the age of gasoline-dominated car culture is rapidly fading, and the future belongs to EVs and smart mobility. For foreign carmakers, the road ahead in China is fraught with challenges, from regulatory changes to consumer expectations and domestic competition.

While brands like Volkswagen are adapting by localizing production and cutting costs, they face a fast-moving, unforgiving market led by tech-integrated EV startups and massive state-backed enterprises.

At the same time, China’s electric vehicle dominance is reshaping global perceptions of automotive leadership. Once considered fast followers, Chinese carmakers are now charting the course — and if foreign brands want to survive in this new ecosystem, they will need more than just legacy prestige.

They’ll need agility, innovation, and the ability to speak to China’s rapidly evolving tastes — or risk becoming relics in a market that no longer waits for anyone.