German carmakers are already losing their grip on the Chinese market to local players led by BYD Co. Now, they’re mounting a fightback to prevent a similar result on their home turf.
BMW AG, Mercedes-Benz Group AG and Volkswagen AG are launching a fresh push in Europe at the Munich auto show this week, wheeling out new electric vehicles they hope will underline German engineering as a global benchmark and recapture attention from Chinese challengers.
The stakes are high. German automakers are grappling with US tariffs, muted sales in Europe and eroding market share in China. At risk is not only the success of their newest models but also the reputation of the country’s car industry, long held up as the gold standard for auto engineering.
The Munich show, which officially starts Tuesday, offers a chance to demonstrate they can still command higher prices, even as Chinese rivals — which are pushing into Europe to escape a bruising price war at home — put forward similar technology for far less. A poor reception would intensify pressure for deeper cost cuts and raise doubts about their long-term role in the electric transition.
“This Munich motor show is very important,” said Felipe Munoz, an analyst at automotive adviser Jato Dynamics. “It’s the declaration of intent from Germany to the world — especially China — that they’re still an important player.”
BMW is showcasing the first of its Neue Klasse EVs, a product line it has poured well over €10 billion ($11.8 billion) into. On Friday, the company unwrapped the iX3, a sport utility vehicle with slick software, high-performance computers and an overhauled design. The car, which starts at €68,900 in Germany, can drive farther on a full battery than Tesla’s longest-range Model Y.
The iX3 “is the best overall product in the industry,” Chief Executive Officer Oliver Zipse said in an interview with Bloomberg Television. He has described the Neue Klasse, which will serve as the basis for 40 models in the coming years, as the company’s boldest shift in decades.
Still, BMW faces an uphill struggle to catch up with Chinese manufacturers, which have set the pace in mass-market EV technology in their home market and are making gains in Europe.
“The only way you can change this conversation is by making a big leap,” said Stephen Reitman, an analyst at Bernstein. “Neue Klasse will put BMW back at the bleeding edge when it comes to automotive innovation.”
Mercedes, meanwhile, is countering with an electric version of its GLC SUV, positioned against the iX3 and Model Y. The vehicle is expected to charge faster and deliver roughly 30% more range than Tesla’s longest-lasting version. The design is less radical than BMW’s Neue Klasse but features a streamlined exterior and a dashboard dominated by a single glass panel. And like at BMW, the car is crucial for Mercedes, as it’s the first built on a new architecture that will also underpin electric iterations of the C-Class and E-Class sedans.
CEO Ola Källenius is betting this new lineup can replace the brand’s uneven first wave of EVs. Flagship models such as the EQS sedan and electric G-Class drew praise for technology but struggled to sell, especially in China.
“Specs should be close to BMW’s Neue Klasse, which we think should help restart Mercedes’ EV transition,” UBS analyst Patrick Hummel wrote in a recent note. “The GLC will likely show that Mercedes is back in the race.”
Volkswagen is showing off affordable models as part of an effort to create an electric “people’s car” to slow the Chinese advance. On Sunday, it debuted a concept for the ID. Cross, an electric iteration of a popular compact SUV that’s due to hit the market in late 2026. The model features a 13-inch infotainment display and gets around 420 kilometers of range on a charge. On Wednesday, Volkswagen unveiled a camouflaged version of the compact ID. Polo, which is expected to be priced below €25,000 when it goes on sale next year.
The cars are two of several compact vehicles Europe’s biggest automaker is displaying in Munich. Its Skoda brand is presenting the Epiq SUV, while the sporty Cupra nameplate is showing off the Raval hatchback. The models will be manufactured in Spain and are due to hit showrooms starting next year.
The toughest test for the European carmakers is in China, the world’s biggest EV market, where buyers are choosing domestic brands for lower prices, advanced software and faster model cycles. And Chinese automakers are also using Munich to underscore their ambitions in Europe, where they accounted for nearly 10% of EV sales in July and hit a record share in hybrids, according to Dataforce.
BYD, Xpeng Inc. and Zhejiang Leapmotor Technology Co. are unveiling new models at the Munich show, joined by Chery Automobile Co., Polestar Automotive Holding UK Plc and other Geely-backed names.
BYD will present the new Seal 06 DM-i Touring station wagon — part of its push to bring more plug-in hybrids to the region and dodge European Union tariffs on Chinese EVs. The model, building on rapid gains in the segment by BYD’s Seal U crossover, will compete with the VW Passat. Xpeng and Leapmotor will bring updated EVs to Munich.
The rivalry isn’t just playing out in showrooms. Ahead of the Munich event, Mercedes ran the AMG GT XX concept at Italy’s Nardò track for eight days of uninterrupted driving and charging. That set a new 24-hour endurance record for EVs, surpassing the previous mark set by Xpeng’s P7 sedan.
Chinese rivals were quick to answer. Just days after the Mercedes test, BYD’s Yangwang brand let loose its U9 Track Edition electric supercar. The vehicle set a new world speed record for an EV of 472.41 kilometers per hour — a feat it achieved at a race track in, out of all places, Volkswagen’s German home state of Lower Saxony.
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