Photo/Illutration Workers build up the exhibition pavillion for Porsche, in the city for the IAA auto show in Munich, Germany, September 4, 2025. (REUTERS)

LONDON/FRANKFURT/BERLIN--Chinese and European carmakers are set to face off at next week’s Munich car show, reflecting intensifying competition on the continent that has pitted incumbents such as Volkswagen against EV giant BYD and newcomers GAC and Changan.

This year’s IAA Mobility, the continent’s biggest biennial car show, comes as European automakers lose ground in China - the world’s biggest market - in what some executives have described as a “Darwinian” price war.

At the same time, to escape pressure at home Chinese automakers are expanding into Europe in search of profits, above all electric vehicle maker BYD, whose global sales soared to 4.2 million cars in 2024, up ten-fold from 2019.

“It’s Europe versus China,” said Pedro Pacheco, vice president of research at Gartner. “The Chinese are trying to grow in Europe while the Europeans are trying to push back on EVs and software.”

BYD will be joined in Munich by fellow Chinese brands Changan, GAC and FAW’s Hongqi brand, among others.

“China is not only back, but more present than ever,” said Jan Heckman, divisional head at German auto lobby VDA, adding this year’s IAA will have 40% more Chinese exhibitors compared to 2023.

According to JATO Dynamics, Chinese brands almost doubled their European market share to 4.8% between January and July 2025 year-on-year.

McKinsey estimates they could eventually match the share currently held by Japanese and Korean automakers, which stood at 14% and 9%, respectively.

TRADE WAR PUTS FOCUS ON EUROPE

Growth has come despite recently imposed EU tariffs on Chinese-made EVs.

“Tariffs will not stop the Chinese,” said Xing Zhou, partner at consultancy AlixPartners. “As the USA is not accessible for political reasons, Europe is all that’s left.”

Hongqi, once favored by Chairman Mao Zedong, will unveil its EHS5, EHS7 and EHS9 models and outline a European strategy.

Chery, China’s top car exporter, will launch its Omoda and Jaecoo brands in Germany, while BYD will showcase its premium Denza brand and the Seal 6 DM-i Touring plug-in hybrid sedan.

Through July, BYD’s European sales jumped 290% to more than 84,000 cars. Recent weak sales in China and production declines add additional pressure to grow faster in Europe.

Europe’s automakers, including Mercedes-Benz, BMW and Renault, are preparing a robust response.

“From a product perspective, this year’s IAA is much more important for European and German automakers than it was two or four years ago,” said Harald Deubener, senior partner at McKinsey.

BMW will debut its iX3 SUV, the first in its Neue Klasse EV lineup. Renault will launch the Clio 6 and Mercedes-Benz will present the GLC, the first in a new generation of EVs.

Volkswagen will launch its compact hatchback ID.Polo EV, which should start below 25,000 euros ($29,267) in 2026.

“What is particularly important is that it is not just niche models that are being presented, but genuine volume drivers,” Deubener said.

Phil Dunne, a managing director at consultancy Stax, said European automakers have been slow to respond to the Chinese challenge.

“Western manufacturers have been a bit too complacent,” he said. “They’ll just have to get used to life with a smaller market share because the Chinese are here to stay.”

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