Mid-tier premium brands feel the squeeze in China

Mid-tier premium brands such as Volvo and Jaguar are struggling to stay relevant in the competitive Chinese market, as local EV marques woo their customers and more popular global brands, including Audi and BMW, push downward into their previous domains.

Once positioned well above mass-market offerings, these brands have been forced to slash prices in recent months to draw customers back into their showrooms.

Volvo is offering incentives with its XC60 SUV, which is priced starting from 250,000 yuan ($34,500). Jaguar's XEL now starts at just 160,000 yuan, and Lincoln's Z sedan begins at 170,000 yuan, according to the China Automotive News.

Even Lexus — long known for holding firm on pricing — has joined the discounting wave, it reported.

The discounts have drawn some consumer interest, but they also point to deeper structural challenges.

Many of these brands have been slow to electrify their lineups or invest meaningfully in intelligent driving systems — areas where domestic EV players have rapidly gained ground.

"Consumers are no longer buying based on badge alone," Shi Hongtao, general manager at car rental and service platform Yian Yongche, told China Automotive News.

Models such as the Arcfox S5 and Dongfeng eπ007, Shi noted, come equipped with large infotainment displays, voice control, and semi-autonomous driving features — technologies that were once confined to the high-end segment.

For many buyers, particularly younger consumers, such tech has become non-negotiable.

The effect is already visible. In the first half of 2025, China's car market grew 11.4 percent year-on-year, with new energy vehicles leading the charge.

But mid-tier premium brands bucked the trend. Volvo's China sales fell 5.9 percent to 59,400 units. Lincoln posted a steep 32.5 percent drop to 33,000 vehicles, while Jaguar Land Rover sold just 22,000 units — a fraction of their former volumes.

For quite a while, these brands relied on large discounts to attract customers, particularly during market downturns.

But this strategy is rapidly losing effectiveness. "The model of trading margin for volume is breaking down," said one Beijing-based dealer for a European brand.

"Today, even if you cut prices by 40 percent, customers may still walk away. There's growing skepticism about the long-term value and brand direction."

Adding to their woes, second-tier premium players now find themselves caught in the middle.

If they maintain higher prices, they risk being undercut by more competitive EV offerings.

Meanwhile, first-tier luxury brands like Mercedes-Benz and BMW are coming close to their pricing territory, eroding any justification for choosing the lesser-known marques.

Brand erosion is becoming a real concern. "If you sell a 300,000-yuan car at 150,000, the brand suffers," said Liu Jun, an auto dealer in Beijing.

"Consumers start to question whether the product was ever worth the original price. It undermines trust."

Liu believes the better path is to maintain pricing discipline and reinforce brand positioning through more exclusive offerings — such as personalized vehicle options, premium after-sales service, and a more curated ownership experience.

"There is still demand for niche, high-quality products," he said, "but not if brands try to compete as volume players in a market they're not equipped to serve."

With competition in China intensifying and EVs commanding ever-greater mindshare, some foreign premium brands may shift their focus to overseas markets, where EV infrastructure remains underdeveloped and fuel cars retain a stronger foothold.

Some industry insiders believe a quiet retreat may already be underway. "The intensity of competition in China is unlike anything in Europe or North America," said Shi.

"If these brands cannot adapt to the pace of change — not just in technology, but in consumer expectations — their role in this market will continue to shrink. A full exit may not be imminent, but marginalization is already happening," he said.