Chinese carmakers to hit the brakes on luxury EV launches as weak demand and cash crunch loom

CHINA: After initially gaining traction in the high-end market once dominated by BMW and Mercedes-Benz, China’s electric vehicle (EV) makers are now facing a slowdown in premium model sales, analysts predict.

According to the latest South China Morning Post report, weak demand and dwindling financial resources are expected to impact sales in 2025 following a successful run.

On Thursday, Shenzhen Denza New Energy Automotive, a joint venture between BYD and Mercedes-Benz, unveiled the 2025 version of its D9, a luxury multipurpose vehicle (MPV) in Shenzhen.

The new D9, featuring BYD’s advanced BAS 3.0+ driving assistance system, is offered in five plug-in hybrid variants and three fully electric options. Prices range from 339,800 yuan (US$46,555) to 469,800 yuan. Since its launch in 2022, Denza has sold over 300,000 units of the D9.

However, data from leading automotive website Autohome reveals a decline in monthly D9 sales during July, August, and September compared to last year. BYD’s third-quarter earnings report further confirmed that Denza’s overall sales fell by 14% from the previous quarter.

Phate Zhang, founder of Shanghai-based CnEVPost, predicts that automakers will slow the pace of new premium model launches in 2025, focusing instead on upgrading existing models.

“This market segment is not easy to expand, and coupled with the overall slowdown in the EV market, sales of high-end EV models have faced considerable challenges this year,” Zhang explained.

The premium EV segment, which includes vehicles priced above 200,000 yuan (US$27,000), has been fiercely competitive, with domestic automakers like Li Auto, Xpeng, and Nio striving to upgrade their brand images.

Zeekr, a premium EV unit of Geely, and BYD, the world’s largest plug-in hybrid and battery EV manufacturer, are also key players.

Huawei Technologies entered the fray this year, partnering with Anhui Jianghuai Automobile Group to develop the ultra-luxury Maextro brand aimed at rivaling Rolls-Royce.

The brand’s first model, the Maextro S800 sedan, was unveiled last month, priced between 1 million and 1.5 million yuan.

Despite these efforts, the premium EV market remains small with limited growth potential. According to the China Passenger Car Association (CPCA), premium new energy vehicles (NEVs) – including plug-in hybrids and battery EVs – accounted for only 10% of the 9.59 million EVs sold in the first eleven months of 2024.

Moreover, NEVs priced above 300,000 yuan have seen slower growth than those below that threshold.

A broader slowdown in EV demand in China is also weighing on the premium market outlook. While the country is expected to report 15.78 million NEV sales in 2025, a 28% increase over 2024, growth has slowed, according to investment bank SPDB International.

“The premium segment faces more challenges as growth slows in the overall EV market,” said Tony Shen, an analyst with SPDB.

The ongoing price war and an increasing number of premium model launches have made it harder for new entrants to break into the market. Zhang Xiang, head of the Jiangxi New Energy Technology Institute, notes that few companies have successfully entered the premium space, with many others struggling with weak sales and substantial investment losses.

In November, Geely announced it would integrate its Lynk & Co brand into Zeekr after both brands struggled with profitability. Similarly, Human Horizons, a Shanghai-based premium EV manufacturer, halted production of its luxury HiPhi brand earlier this year.

“It might be the end of a chapter for EV makers in their ‘premiumization’ efforts,” Zhang from CnEVPost concluded. “We are already seeing fewer launches of premium EV models this year.”