Price Collapse: The World's Largest Single Market Undergoing Transformation

As evidenced by the latest financial reports from BBA, the harsh reality of BBA's performance in the Chinese market is laid bare. In the first half of 2025, Mercedes-Benz's post-tax net profit plummeted by 55.8% to 2.7 billion euros, with a staggering 69% year-on-year decline in net profit for the second quarter alone. BMW and Audi fared no better, with post-tax profits dropping by 29% and 37.5%, respectively.

Even more concerning is the collapse in sales. BMW's global sales declined by just 0.5%, but its Chinese market sales plummeted by 15.5%; Audi's global sales fell by 5.9%, with its Chinese market sales crashing by 10.2%; Mercedes-Benz's global sales decreased by 8%, with its first-half sales in China totaling 293,200 units, down 14% year-on-year, with the second quarter seeing a sharp decline of 19%.

China's status as the largest single market for BBA is now under threat. Once contributing over 30% of global sales, the Chinese market has now become the biggest drag on performance.

Mercedes-Benz CEO Ola Källenius attributed the challenges to three factors: U.S. retaliatory tariffs, intense competition in the Chinese market, and the prolonged transition period for electric vehicles. In fact, the waning enthusiasm of Chinese luxury car consumers is eroding the foundation of BBA.

The market response has been dominated by headlines about “luxury cars being sold at rock-bottom prices.” Shanghai dealers have slashed the price of the Mercedes-Benz A-Class to 125,600 yuan, effectively selling it at half price; the BMW 5 Series is offering discounts exceeding 150,000 yuan, with the final price dropping into the 300,000 yuan range. The collapse of the pricing structure has become the last desperate struggle for luxury brands.

In the luxury car market's winter, the dealer network is bearing the brunt. According to reports, over 80 Mercedes-Benz 4S stores terminated their authorizations in the first half of this year, affecting 23 cities including Beijing, Shanghai, and Hangzhou.

BMW's first global 5S store, Beijing Xingdebao, closed due to financial pressure, and two Audi flagship dealers switched to the Aito camp. The collective “rebranding” of dealers has left some owners in a predicament of inconvenient maintenance.

Behind the wave of store closures lie alarming business figures. A Mercedes-Benz 4S store in a second-tier city pays a monthly rent of 3 million yuan, yet its gross profit margin on car sales is less than 5%. “On average, we lose 20,000 yuan for every Mercedes-Benz car sold,” revealed a dealer, adding that the 200 million yuan invested earlier faces the risk of being sunk, and without transformation, the only option is to wait for death.

The four pillars of profit in the traditional 4S model have collapsed: inverted new car sales prices, shrinking maintenance and repair services, reduced financial rebates, and unattainable manufacturer rebates.

According to a survey by the China Automobile Dealers Association, 84.4% of car dealers experienced varying degrees of price inversion in 2024, with 60.4% facing price inversions exceeding 15%. Severe price inversions have led to tight liquidity for dealers, which has become the primary challenge and risk they face.

The heavy-asset operational model has become a fatal burden in the electric vehicle era. Dealers typically procure vehicles through third-party financing agreements, and once sales stall, this can easily trigger a breakdown in the capital chain. Mercedes-Benz's expansion strategy of adding 50 new stores annually in China during its peak period has now become an unbearable burden.

Loss of the mid-to-low-end market, collapse of electrification

The collapse of BBA sales began with the loss of the mid-range market. The price range of 200,000 to 400,000 yuan was once the main sales territory for BBA, but it has now been completely overtaken by Chinese new forces.

Data shows that sales of BMW models such as the iX3, i3, and X3 have declined by approximately 50%; Audi's entry-level models A4L and Q2L have seen sales declines of 25.4% and 46%, respectively; and Mercedes-Benz's entry-level models have declined by 12.2%. Brands like NIO, Li Auto, Aito, and Xpeng have precisely targeted this market gap.

The failure of their electrification transformation has further compounded the BBA's woes. In the first half of 2025, Mercedes-Benz's pure electric vehicle sales in China plummeted by 66% to just 5,200 units; Audi's electric vehicle sales dropped by 23.5%; and BMW's electric vehicle penetration rate in China remained below 20%, far below China's overall new energy vehicle penetration rate of 35%.

Behind consumers' choices lies the comprehensive lag in product competitiveness. BBA's electric vehicle products struggle to gain recognition from the new generation of consumers, lagging behind Chinese brands in key areas such as smart cockpits and autonomous driving.

Even more critically, their configuration strategies have been misguided. While Chinese brands offer urban navigation and lidar as standard features, BBA's Level 2 driver-assistance systems remain optional extras requiring additional payment. The traditional luxury brand approach, combined with the current market landscape, has made the collapse in sales inevitable.

The Channel Revolution Has Begun, and Transformation Is Urgent

Dealers who once relied on BBA to “make money effortlessly” have launched a collective transformation wave. Zhongsheng Group converted nearly 50 luxury car 4S stores into Hongmeng Smart Driving Centers as early as last year; Yongda Group also added dozens of Huawei Smart Selection stores.

According to incomplete statistics, over 40 former BBA dealers have switched to the NIO camp; the former BMW global flagship 5S store was taken over by a BYD dealer, transitioning to operate the Tengzhong and Fangchengbao brands. The phenomenon of dealers “rebranding” has evolved from individual actions into an industry trend.

Behind the rebranding lies a fundamental shift in the profit model. After a Mercedes-Benz 4S store in Changsha switched to Aito, the comprehensive gross profit per vehicle increased to approximately 13,000 yuan, whereas previously, each Mercedes-Benz sold resulted in an average loss of 20,000 yuan. Faced with a matter of survival, dealers have chosen to embrace the new forces.

New forces adopt a model of “light-asset operations at the front end and authorized heavy operations at the back end,” relieving dealers of inventory pressure. Taking the collaboration between Aion and Zhongsheng as an example, dealers receive a fixed commission of approximately 4.5% per vehicle sold, with the company handling online marketing while dealers focus on offline maintenance and repairs.

This model completely overturns the financial chain risks associated with the traditional three-party financing model (manufacturer-bank-dealer). As heavy assets transition to light assets, a channel efficiency revolution is profoundly reshaping the automotive distribution system.

In response to the crisis, BBA has launched its electric vehicle transformation 2.0. For instance, BMW has partnered with Momenta, Alibaba, and Huawei; Audi is collaborating with Huawei on one hand and Momenta on the other; and Mercedes-Benz is working with Qualcomm to develop intelligent driving chips. The all-new domestically produced CLA model will feature Momenta's advanced intelligent driving solution, signaling a major shift in technical strategy.

In terms of product planning, BMW plans to launch a new-generation model in China by 2026; Mercedes-Benz has announced the launch of seven dedicated models in China between 2025 and 2027. German giants have finally recognized that the Chinese market requires tailored solutions rather than simple adaptations of global models. However, the transition came too late, having already missed the initial wave of benefits from new energy vehicles.

Moreover, the channel model is also undergoing significant changes. Mercedes-Benz has already announced that its dealer network will shift from “scale expansion” to “quality and efficiency improvement.” This trend is not limited to BBA; other brands like Lincoln have launched the “Spark the Prairie” plan, reducing single-store area by 80% to approximately 800 square meters and lowering the investment threshold to 1.5 million yuan.

Lincoln's innovative model includes a “zero inventory pressure for the first six months” policy, a digital marketing platform, specialized training, and regional exclusive protection rights. The total investment per store is controlled between 1 million and 2 million yuan, just one-tenth of a traditional 4S store, and has already helped its dealer network achieve an 80% profit rate.

However, the window for transformation is closing. The trend of dealers switching to new forces continues to grow, with Chinese electric vehicle brands surpassing the 50,000-unit monthly sales mark, while Mercedes-Benz electric vehicles only sell 1,000 units per month. The luxury aura of BBA is fading in the electric and intelligent era, and brand value rejuvenation has become the greatest challenge.

The pains of transformation continue. When Mercedes-Benz owners in Yinchuan received text messages terminating their services, when consumers in Shanghai drove away in a Mercedes-Benz A-Class for 125,600 yuan, and when the Mercedes-Benz showroom in Beijing's Penglong Tower transformed into a HarmonyOS Smart Driving Experience Center, the shift in brand power within the automotive industry had already been completed.

In the Darwinian game of China's automotive market, the law of survival of the fittest is eliminating laggards at an unprecedented pace. When Lincoln can still turn a profit by reducing the size of its 4S stores by 80%; when Mercedes-Benz plans to launch seven China-exclusive models between 2025 and 2027; when Audi will continue to intensively launch new-generation electric vehicles over the next three years, despite slowing down its global electrification transformation; and when BMW partners with Huawei to redefine the Chinese market, the self-redemption of the BBA has only just begun.