Walking through the halls of Messe München at the IAA Mobility 2025, it felt less like an auto show in Germany and more like one in Shenzhen or Tianjin. Ironically, one of the few distinctly European displays was a life-sized McLaren 720 built entirely of Lego Technic pieces, complete with real tires and a working dashboard. Beyond that, the overwhelmingly dominant presence was Chinese.
From Frankfurt Pride to Munich Reality: The IAA Mobility, long based in Frankfurt, was once the stage where German engineering giants —Audi, BMW, Mercedes-Benz, Porsche, Volkswagen — showcased their unmatched excellence in automotive design and innovation. French, Italian, and British brands followed closely behind, supported by component titans like Bosch and ZF. For decades, this exhibition reflected Europe’s industrial supremacy.
In the early 2000s, China’s industrial boom made it the ideal growth engine for European automakers. During my first visit to Shanghai in 2002, Volkswagens filled the streets, Cantonese cabbies drove Santanas, and officials preferred Audis or Mercedes limousines. These cars were assembled in China through joint ventures that Beijing mandated for foreign entry. The formula worked — profits ballooned, and European firms quickly adapted products to fit Chinese tastes.
By the late 2010s, China had become the largest or second-largest global market for most luxury marques and far and away the biggest for mass-market European brands. But something else was happening beneath the radar. Joint ventures and technology sharing planted the seeds of a powerful domestic industry.
The Rise of Chinese Carmakers: Initially, Chinese manufacturers like SAIC, FAW, Changan, and Geely produced vehicles that resembled crude imitations of Western models — adequate in features, light on refinement. Yet they were affordable and packed with eye-catching software: oversized infotainment screens, flashy lighting, and connected services. When MG (owned by SAIC) launched the Hector in India, it was loaded with features at an aggressive price, even if the driving experience felt lackluster.
At the same time, the auto world was moving steadily toward electrification. European firms, flush from Chinese earnings, pledged lofty zero-emission targets. Governments, such as the UK, announced bans on combustion-engine sales by 2030. However, execution faltered. Legacy carmakers stumbled on delays, mismanagement, and over-promising.
Meanwhile, China pressed ahead with intent. Domestic automakers invested in full electrification, backed heavily by state support. Companies like BYD integrated the entire value chain — from lithium mining to battery production to final assembly — while suppliers like CATL, CALB, and Gotion globalised lithium cell manufacturing. By popularizing cost-efficient Lithium Ferro-Phosphate (LFP) battery chemistry, they slashed costs and raised production scales. Soon, Chinese companies were not simply catching up; they were dictating global EV standards.
Munich Through Chinese Eyes: This year’s auto show proved the point. Chinese firms dominated the halls with cutting-edge EVs that Europeans themselves queued up to see. Brands like Xpeng, BYD, and Avatr drew more attention than the latest models from BMW or Mercedes. In markets from Thailand to Brazil, affordable Chinese EVs have swept consumers away, simultaneously decimating local auto jobs while accelerating clean mobility.
Europe has attempted to respond with tariff barriers and incentives for its home industries. Yet the Chinese have already maneuvered around them: BYD is setting up a major factory in Hungary, while Xpeng and Aito vehicles are contract-assembled in Austria by Magna. Even within Europe, VW has regained the EV sales crown — but often by leaning on Chinese-sourced technology. The reversal of fortune, compared to two decades ago, is stark.
Sales Slump and Strategic Blindness: What makes Europe’s challenge worse is its collapsing demand in China itself. In the first half of 2025, sales for Audi, BMW, and Mercedes plunged nearly 20% compared to 2024, which itself had already seen a double-digit drop. Chinese consumers now prefer domestic brands, whether it’s value-for-money players like BYD or aspirational “new luxury” labels such as Lynk & Co and Xpeng. In many cases, they offer software, styling, and performance that European stalwarts struggle to match.
Can Europe Rebound?: Europe has the pedigree. It invented and perfected the modern automobile and still possesses engineering brilliance. Yet winning back ground requires realism. Full electrification may prove less inevitable than policymakers assume, and European automakers must recognize China less as a lucrative sales hub and more as a strategic competitor shaping the industry’s future.Unless Europe overcomes its complacency, its automakers risk becoming dependent clients of the very market they once dominated.
