Goldman Sachs: Chinese Brands Hit New High in European Share, Domestic Brands Like VW Under Pressure

Overview

This research report is Goldman Sachs's monthly competition monitoring update on the European automotive market for May 2026. Core conclusions show that despite slowing sales growth, the market share of Chinese automotive brands continued to hit record highs in five core European markets (Germany, UK, France, Italy, Spain), mainly due to the weakness of European domestic mass market brands. Meanwhile, the competitive landscape within Chinese brands is undergoing key changes; BYD surpassed MG to become the leader in monthly data for the first time, prompting pioneers like MG to accelerate their transition from pure export models to localized manufacturing in Europe to consolidate long-term competitive advantages.

Core views

Demand Side Performance: Chinese brand growth remains strong but marginal slowdown observed. New car registrations for Chinese brands in five EU countries reached 56,435 units in May; although it represents a 189% YoY increase, the high-speed expansion seen in previous months has slowed slightly. This volume pushed its market share to 7.14%, a significant 459 bps improvement YoY. Including European brands owned by Chinese entities such as MG and Volvo, total share is approaching 12%. Regionally, Italy and the UK are main growth engines, while Germany and Spain maintain steady penetration. Competitive Landscape Differentiation: Rise of Chinese brands corresponds to loss of European mass market brands. Rolling three-month data shows Chinese brands collectively captured 439 bps of share, while the European mass market brand camp lost 419 bps, retreating almost全线 (entirely) except Tesla. VW Group was most severely affected, with Volkswagen brand share declining 98 bps; Renault Group and Stellantis Group's mass market brands also showed noticeable declines. In contrast, European luxury brands demonstrated strong resilience, losing only minimal share, with Audi achieving slight growth. Top Player Turnover: BYD climbing the top triggered price wars and strategic adjustments. BYD broke through the 3% share threshold in May, replacing MG as the new leader among Chinese brands. Chery Group followed closely with multi-brand and full powertrain strategies. Facing BYD's offensive, MG adopted an aggressive defensive strategy:一方面 (on one hand) reducing MG4 Urban price below €20,000 to protect sales;另一方面 (on the other hand) announced investment of approx. €200 million to build a 120k unit/year EV plant in Galicia, Spain (estimated production start 2028). This move aims to not only avoid EU tariffs but also serves as a key signal of transitioning from trade exports to local manufacturing. Supply Side Outlook: Localized production enters acceleration phase. The report cites S&P Global forecast indicating Chinese brand local production in Europe expected to expand at a 134% CAGR between 2025 and 2030. This shift from 'product going overseas' to 'supply chain going overseas' is viewed by institutions as the long-term foundation supporting structural share growth of Chinese brands in Europe, even facing fierce internal price competition in the short term.

Analysis framework

The research report adopts high-frequency monthly registration data as core tracking indicators, using 'Rolling 1 Month (R1M)' to capture latest marginal changes, combined with 'Rolling 3 Months (R3M)' to filter single-month fluctuations and confirm medium-term trends. Analytically, the institution strictly divides market participants into four camps: 'Chinese Brands', 'European Mass Market Brands', 'European Luxury Brands', and 'Other Asian/US Brands', performing share addition/subtraction attribution analysis under zero-sum game conditions. Additionally, the report not only focuses on sales data but also combines corporate capital expenditure (such as factory announcements) and pricing behavior (such as discount promotions) to verify supply side strategic intentions, thereby judging the long-term structural drivers behind short-term share fluctuations.

Methodology notes

• Industry / Industrial Analysis FrameworkVolume-price decomposition

  Two-dimensional tracking of registrations and market share

  The report looks beyond absolute sales growth (+189%), focusing more on relative market share changes (+459bps). In stock or low-growth markets, share change reflects the rise and fall of competitive strength better than absolute sales volume, serving as the core indicator for judging structural opportunities.

• Industry / Industrial Analysis FrameworkUpstream-Midstream-Downstream Supply Chain Transmission

  Evolution logic from trade exports to local manufacturing

  The report interprets MG building a factory in Spain as a key turning point. In automotive going overseas analysis, when single market sales reach a certain threshold, localized production becomes the necessary stage to avoid tariff barriers, reduce logistics costs, and respond to local demands. This marks the transformation of the industry from 'reversible trade behavior' to 'irreversible industrial rooting'.

• Cycle and Prosperity FrameworkProsperancy Turnpoint Analysis

  Rolling average (R1M/R3M) smoothing short-term fluctuations

  Automotive industry is influenced by delivery schedules, holidays, etc., making single-month data noisy. The report displays R1M (sensitivity) and R3M (stability) simultaneously. When both directions align, trends are confirmed; when diverging, short-term disturbances are flagged. This is standard methodology for tracking high-frequency industry data.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• BYD (Unlisted/Related Targets)

  Beneficiary: Surpassed MG for first time in May to become the leading Chinese brand in Europe by share, exceeding 3% share

  Strengths

  Strong product capability, strongest growth momentum, share soaring in UK, Italy, Spain, etc.

  Comparison

  Compared to MG, BYD still relies mostly on exports now, local production progress slightly slower but catching up rapidly

  Risks

  May face stricter EU anti-subsidy investigations or tariff upgrades

• SAIC/MG (SAIC Motor Group)

  Defender: Although lost the top spot, actively defends through factory building and price cuts

  Strengths

  Extensive European operation experience, first to launch local manufacturing (Spain plant), high brand awareness

  Weaknesses

  Share surpassed by BYD, forced into price war (MG4 dropped below €20k)

  Comparison

  Compared to BYD, MG has deeper roots in Europe, but growth explosive power weakened

  Risks

  Price war compresses profit margin, Spain plant completes only in 2028,存在着 time window risk

• Volkswagen (VOW.DE)

  Victim: VW brand is the European auto company that lost the most share during this wave of Chinese brand rise

  Weaknesses

  VW brand share declined 98bps YoY, Seat declined 51bps, insufficient competitiveness in the mass market prices targeted by Chinese brands

  Comparison

  Compared to Renault and Stellantis, VW Group's share loss magnitude is larger

  Risks

  If unable to effectively counter Chinese brand offensives, may face decreased capacity utilization and deteriorating profitability

Key data

• May EU5 Registrations for Chinese Brands56,435 vehiclesUp 189% YoY, continuing growth from 50,650 in April
• May Market Share for Chinese Brands7.14%Improved 459 bps YoY, hitting record high
• BYD May Share3.09%First time breaking 3%, becoming number one among Chinese brands
• May Change in VW Brand Share-98bpsLargest decline among European mass market brand camps
• MG Spain Plant Investment AmountApprox. €200 millionCapacity 120k units/year, estimated startup 2028
• Forecasted CAGR for Chinese Brand Production in Europe134%CAGR 2025-2030 (S&P Global data)

Impact & implications

For traditional European automakers, VW brand faces the most severe share erosion and cannot be easily reversed in the short term, which may force them to further contract operations or seek cooperation. For Chinese automakers, BYD's topping and MG's factory building indicate competition has entered a new stage: the period of profitability relying purely on cost-effective exports is fading. Future decisive factors lie in who can complete localization supply chain layout and brand mindshare occupation faster. MG4 Urban dropping below €20,000 also signals that even before local production lands, price wars will remain the main means of fighting for share, posing tests to profit margins for all participants.

Risks

• EU may implement stricter tariffs or non-tariff barriers, hindering Chinese brand expansion
• Intensified price wars among Chinese brands may lead to revenue growth without profit increase
• European domestic auto companies may adopt radical countermeasures (such as significant price cuts or policy lobbying)

What to watch

• Construction progress of MG Spain plant and actual capacity ramp-up after 2028 startup
• Subsequent localization factory site selection and timelines for BYD and other Chinese brands in Europe
• Whether European mass market brands will launch targeted competitor products or adjust pricing strategies to stop share decline
• Any new developments in EU electric vehicle tariffs on China