China's premium car demand is rising, but European automakers' share continues to be squeezed by domestic premium brands

Overview

This report is Goldman Sachs' monthly tracking of European OEM performance in China's auto market in May 2026. The report notes that the competitive landscape in China continues to tilt toward domestic brands, with domestic technology and premium brands accelerating into the premium price bands where European brands such as Mercedes, BMW, and Audi have traditionally earned most of their profits; while European premium brands are better able to defend their position than mass-market brands, they remain under overall pressure.

Core views

The core views include: first, European premium brands are performing better overall than international mass-market brands, but Mercedes and BMW are losing share, while Audi and Volvo are relatively more stable; second, China's technology and premium brands are expanding rapidly on the back of product launches such as Zeekr 8X, NIO ES9, Xpeng GX, and AITO M6; third, VW Group is the most exposed company among international brands in the mass market, with the VW brand showing a particularly sharp decline; fourth, the mass-market brands of BYD Group and Geely Group are also losing share, indicating that competition intensity in the mass market is higher than in the premium market.

Analysis framework

The report tracks around 90 of roughly 100 active auto brands in China, covering more than 90% of the market's retail volume, and uses YoY changes in R1M/R3M market share to measure short-term trends for brands or brand cohorts. The analysis is broken down into cohorts such as European premium, international mass market, domestic technology and premium, and domestic mass market, comparing share migration across different price bands and brand groups.

Methodology notes

• Industry trackingChina auto brand market share tracking

  YoY market share changes in R1M/R3M

  Uses YoY share changes over the most recent 1 month and 3 months to observe short-term share momentum, measured in basis points, which is suitable for identifying changes in the competitive landscape between brands or cohorts.

• Brand cohort analysisPremium and mass-market segmentation

  Segmenting cohorts by brand positioning and group affiliation

  The report groups VW Group mass-market brands, BYD Group mass-market brands, Geely Group mass-market brands, China's technology and premium brands, and others to compare share migration across different price bands and ownership backgrounds.

• Institutional methodology disclosureGoldman Sachs factor profile

  Growth, Financial Returns, Multiple, and Integrated percentiles

  The appendix explains that Goldman Sachs uses growth, financial returns, valuation multiples, and composite indicators to compare stock characteristics; the main body of this report does not provide specific factor scores for any single company.

Asset mapping & comparison

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

• European premium brands (Mercedes Cars, BMW, Audi, Volvo)

  One of the report's core observation targets

  Strengths

  Premium brands as a whole are better able than mass-market brands to defend their market position, with Audi and Volvo showing relatively greater resilience.

  Weaknesses

  Mercedes and BMW are losing share, respectively affected by an EV product gap and customer wait-and-see behavior ahead of new model launches.

  Comparison

  Facing the rapid expansion of China's technology and premium brands, the traditional profit price bands of European premium brands are being challenged more directly.

  Risks

  Dense launches of domestic premium new models, insufficient EV product competitiveness, purchase delays, and weakening brand premium.

• VW Group mass-market brands

  The most pressured European asset among international mass-market brands

  Strengths

  The group still has an established brand base including VW, Skoda, and Jetta.

  Weaknesses

  R1M/R3M YoY share declined by -158/-161 bps, with the VW brand's own decline nearly matching the overall drop.

  Comparison

  The report describes it as the steepest decliner among foreign mass-market brands, with Tesla being the exception among international brands.

  Risks

  Competition in the mass market is the fiercest, while domestic brands are exerting pressure through pricing, product cadence, and new energy transition.

• China technology and premium brands (Zeekr, NIO, Xpeng, AITO, Xiaomi, etc.)

  The main incremental competitors to European premium brands

  Strengths

  R1M/R3M YoY share increased by +329/+279 bps, with Zeekr and Xiaomi as standout contributors.

  Weaknesses

  The report does not provide validation on profitability or valuation, and share growth does not necessarily equate to profit improvement.

  Comparison

  Incremental growth is moving into the premium price bands where Mercedes, BMW, and Audi generate most of their profits.

  Risks

  A slowdown in new product cycles, intensifying price competition, and insufficient channel and delivery capabilities could affect sustainability.

• BYD Group mass-market brands and Geely Group mass-market brands

  Leading cohort in the domestic mass market

  Strengths

  They benefit from group scale, brand portfolios, and new energy supply chain advantages.

  Weaknesses

  BYD Group mass-market brands fell -168/-227 bps, and Geely Group mass-market brands fell -63/-116 bps.

  Comparison

  Although China's premium and technology brands are expanding, domestic mass-market brands are also losing share because competition in the mass-market price band is the fiercest.

  Risks

  Lower subsidies for mass-market models, intensifying competition, and a shift in product mix toward premiumization may cause internal divergence.

Key data

• Coverage scopeAbout 90 active brands, covering more than 90% of China's market retail volumeUsed to observe monthly share changes in China's auto market.
• European premium brands totalR1M/R3M YoY share change of -75/+2 bpsThe combined performance of Mercedes, BMW, Audi, and Volvo was better than that of mass-market brands, but they still face pressure from domestic premium players.
• Mercedes Cars-28/-11 bpsThe report believes the discontinuation of the legacy EQ lineup affected EV sales.
• BMW brand-29/-10 bpsThe report believes some customers delayed purchases while waiting for the year-end launch of Neue Klasse.
• Audi and VolvoAudi at -9/+16 bps, Volvo at -9/+8 bpsAudi was supported by incremental sales from the AUDI brand, while Volvo was driven by the locally developed XC70 PHEV.
• China technology and premium brand cohort+329/+279 bpsBrands such as Zeekr and Xiaomi led the gains and are moving into the key profit price bands of European premium brands.
• VW Group mass-market brands-158/-161 bpsThis was the group with the most pronounced decline among international mass-market brands, with the VW brand itself at -156/-159 bps.
• Leapmotor+193/+152 bpsWhile ramping up volume in China, it is also advancing its expansion into the European market.
• BYD Group mass-market brands-168/-227 bpsReflecting intensified competition in the mass market and relatively lower subsidies this year for mass-market models.
• Geely Group mass-market brands-63/-116 bpsThe mass-market brand lineup is under pressure, but Zeekr under the group is performing strongly in the premium cohort.

Impact & implications

The investment implication of the report is that domestic Chinese premium and technology brands are shifting competitive pressure from the mass-market price band into the profit pool of European premium brands. The profit base of Mercedes and BMW in China is facing pressure from both market share and product cycles, while Audi and Volvo are relatively stable in the short term but still operate in an environment of intensifying competition. VW Group has greater exposure in the mass market, while the share losses of the mass-market brands of domestic giants such as BYD and Geely indicate that price wars and dense product launches also weigh on the lower-end or mass-market product lines of domestic leaders.

Risks

• Further intensification of competition in China's mass market may put simultaneous pressure on both market share and profit margins.
• Domestic technology and premium brands entering the price bands of European premium brands may weaken the profit pool of European automakers in China.
• Mercedes' EV product gap and BMW customers' wait-and-see stance ahead of new model launches may weigh on short-term sales.
• An accelerated launch cadence for premium models, alongside lower subsidies for mass-market models, may continue to pressure mass-market brand performance.
• The report is mainly based on market share changes and does not directly provide impacts on company earnings, valuation, or target prices.

What to watch

• Whether subsequent monthly R1M/R3M market share data continue the expansion trend of domestic premium brands.
• Order changes around Mercedes' post-EQ product transition and BMW's year-end Neue Klasse launch.
• The sustainability of incremental sales from Audi's AUDI brand and Volvo XC70 PHEV.
• The new product delivery cadence of domestic premium brands such as Zeekr, Xiaomi, NIO, Xpeng, and AITO.
• Whether VW Group's mass-market brands continue to lose share in China, and the progress of Leapmotor's European expansion.
• The share performance of BYD and Geely mass-market brands amid price wars, subsidy changes, and product mix upgrades.