And it's happening in the vital Chinese market.
While Mercedes-Benz, BMW and Audi remain the world's best-selling luxury brands, the German automakers have a new common problem. It's called China. For years, they have dominated the luxury segment in the world's biggest automotive market, controlling a combined 60 percent share of all luxury vehicle sales. But their premium position could soon be coming to an end. Bloomberg reports the rise of electric vehicle brands, specifically Tesla, Nio, and Li Auto have dramatically increased in popularity among wealthy Chinese buyers. The proof? All three German brands experienced a Chinese market sales decrease last year. Only part of the blame is the coronavirus pandemic.
"Bottom line: whenever Tesla opens a store in a new city, the Germans lose share... and there's still lots of headroom for opening new stores," said industry analyst Alexander Potter, via Bloomberg.
It's not all gloom and doom, however. The Mercedes EQA all-electric crossover, a Tesla Model Y rival, will debut this week and the Model S-fighting EQS isn't far behind. The BMW iX, the first of 25 new all-electric and plug-in hybrid models BMW expects to be on sale by 2023, will hit dealerships in the coming months.
Mercedes knows how vital new EVs are to its survival. Although it beat BMW in overall sales in 2020, Mercedes lagged behind on EVs and PHEVs. BMW sold nearly 193,000 electrified vehicles last year compared to Mercedes' 160,000 total. Audi, meanwhile, sold more than 47,000 e-tron SUVs.
Another key area where Tesla already has a huge advantage is its new Shanghai Gigafactory, which is churning out new Model 3s and Model Ys at a rapid pace to keep up with demand. Mercedes has a joint venture with China's BAIC in Beijing. In 2017, the two announced a $740 million agreement to build EV batteries and future electric vehicles at a new factory in China. For its part, BMW began building the new iX3 last year in Shenyang.
It's now more critical than ever for all three German brands to expand their Chinese EV presence. Tesla isn't the only competitor hoping to steal customers.