European OEMs in China passenger-vehicle market Report Interpretation

Overview

Goldman Sachs reviews July 2026 China passenger-vehicle retail data and the performance of European OEM joint ventures. It finds that the overall market contraction remained severe but showed relative support from NEVs, while legacy ICE exposure continued to weigh on German brands; Mercedes’ new GLC EQ was an early exception.

Core views

China domestic passenger-vehicle retail volume was 1.46mn units in July 2026, down 20.8% year on year, while average MSRP rose 5.2%. The report characterises the market decline as showing signs of stabilising because the powertrain split remained highly uneven: NEV volume was 953k units, down only 3.5%, versus a 40.7% decline in ICE volume to 508k units. NEV adoption reached 65.2%. On rolling three-, six-, and 12-month measures, total PV retail volumes fell 22.1%, 21.1%, and 12.0%, respectively; the corresponding ICE declines were 39.4%, 31.9%, and 21.8%, compared with NEV declines of 6.9%, 11.1%, and 2.8%. NEV penetration rose to 63.7%, 58.7%, and 56.8% across those periods. The report links the European OEMs’ weaker position to their remaining ICE-heavy product mix. Roughly 93% of combined July volume for German OEM joint ventures still came from ICE models, although new BEV products are beginning to arrive. Mercedes-Benz Cars sold 21,583 units, down 13.6% year on year, but outperformed the overall market. Its NEV volume rose 163.9% while ICE volume fell 17.8%, and its July share increased 12bp year on year to 1.5%. The E-Class and newly launched GLC EQ supported results; the GLC EQ recorded 1,436 units in its first month, equivalent to 7% of Mercedes volume. Goldman Sachs views the model as important to Mercedes’ BEV defence in the high-volume mid-size SUV segment, while noting that its launch appears to have cannibalised ICE GLC sales by roughly a similar year-on-year amount. Mercedes’ rolling three-, six-, and 12-month volumes nevertheless remained down 32.0%, 29.5%, and 25.7%, with market shares of 1.6%, 1.8%, and 1.8%. BMW delivered 32,814 units, down 19.7% year on year. NEV volume fell 45.3%, while ICE volume declined 17.2%; its July share was 2.2%, up 3bp. BMW remained dependent on the ICE 3-Series L, described as the only German premium model still selling more than 10k units per month, as it clears older-generation NEV models before the Neue Klasse iX3 debut expected in Q4 2026. Audi/AUDI sold 29,900 units, down 20.5%; NEV volume rose 966.1% but ICE volume fell 30.4%, leaving July share at 2.0%, up 1bp. VW recorded 87,550 units, down 40.0%, with NEV down 23.7% and ICE down 42.1%; its 6.0% share fell 192bp. The report highlights the July launch of the Xpeng co-developed ID.Unyx 06/07/08 and says market response to these products should be assessed in the coming months.

Analysis framework

The report uses CPCA and company retail-registration data to compare China PV demand by powertrain, price and rolling one-, three-, six- and 12-month periods. It then compares European OEM joint ventures’ volumes, market shares and NEV/ICE mix, using model launches and product mix to explain relative performance.

Methodology notes

• Industry AnalysisVolume-price decomposition

  Retail-volume and average-MSRP comparison by powertrain

  The report separates sales volumes from average MSRP and further divides the market into NEV and ICE vehicles, showing that the overall decline was driven mainly by the much steeper ICE contraction.

Asset mapping & comparison

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

• Mercedes-Benz Cars

  Relative July outperformance was supported by the E-Class and new GLC EQ.

  Strengths

  NEV volume grew 163.9% year on year; GLC EQ delivered 1,436 units in its first month.

  Weaknesses

  Rolling three-, six-, and 12-month volumes fell 32.0%, 29.5%, and 25.7%.

  Comparison

  July sales decline of 13.6% was less severe than the 20.8% decline in the overall PV market.

  Risks

  GLC EQ sales may cannibalise ICE GLC volume.

• BMW brand

  The brand remains reliant on the ICE 3-Series L while refreshing its NEV portfolio.

  Strengths

  The 3-Series L remained the only German premium model selling more than 10k units per month.

  Weaknesses

  NEV volume fell 45.3% year on year.

  Comparison

  July share rose 3bp to 2.2% despite a 19.7% volume decline.

  Risks

  Transition execution ahead of the Neue Klasse iX3 debut in Q4 2026.

• Audi/AUDI

  NEV growth partly offset a steep ICE contraction.

  Strengths

  NEV volume increased 966.1% year on year.

  Weaknesses

  ICE volume fell 30.4% year on year.

  Comparison

  July share increased 1bp to 2.0%.

  Risks

  Overall volume still declined 20.5% year on year.

• VW brand

  VW is introducing Xpeng co-developed ID.Unyx models under its China strategy.

  Strengths

  New ID.Unyx 06/07/08 models launched in July.

  Weaknesses

  July volume fell 40.0% and market share declined 192bp to 6.0%.

  Comparison

  Its decline was materially worse than the total PV market’s 20.8% fall.

  Risks

  Market response to the new ID.Unyx products remains to be seen.

Key data

• China PV retail volume, July 20261.46mn unitsDown 20.8% year on year; average MSRP up 5.2%.
• NEV retail volume and penetration, July 2026953k units; 65.2%Volume down 3.5% year on year; materially more resilient than ICE.
• ICE retail volume, July 2026508k unitsDown 40.7% year on year.
• Mercedes-Benz Cars volume, July 202621,583 unitsDown 13.6% year on year; NEV up 163.9% and ICE down 17.8%.
• GLC EQ first-month volume1,436 unitsRepresented 7% of Mercedes July volume.
• VW volume, July 202687,550 unitsDown 40.0% year on year; market share fell 192bp to 6.0%.

Impact & implications

The report indicates that China’s shift toward NEVs is cushioning total market demand but is increasing pressure on European OEM joint ventures that remain concentrated in ICE products. Mercedes’ GLC EQ offers an early BEV defence, while BMW’s upcoming iX3 and VW’s ID.Unyx launches are key product-transition developments.

Risks

• The report notes potential cannibalisation of Mercedes’ ICE GLC by the new GLC EQ.
• BMW’s NEV transition depends on the forthcoming Neue Klasse iX3 launch.
• VW’s new ID.Unyx products face uncertain market reception.

What to watch

• Monthly evidence of whether NEV resilience continues to stabilise the broader China PV market.
• Mercedes GLC EQ volumes and the extent of ICE GLC cannibalisation.
• BMW’s Neue Klasse iX3 debut in Q4 2026.
• Market response to VW’s Xpeng co-developed ID.Unyx 06/07/08 models.