Mercedes-Benz is pulling out of China’s electric vehicle market, selling its remaining stake in premium EV maker Denza. This move comes as luxury spending in the world’s largest auto market takes a hit, according to a recent report from The Wall Street Journal.

Unwinding a Decade-Long Partnership

The German automaker has decided to unwind its bet on China’s electric vehicle market by selling its remaining 10% stake in Denza to BYD. This joint venture, established in 2010 with a mission to create a leading premium brand of EV and hybrid cars in China, has now come to an end.

“Denza has officially started the new era of fully owned by BYD,” the Chinese company stated on Tuesday.

Challenges in a Competitive Landscape

Mercedes’ decision reflects the mounting challenges it faces in China’s fiercely competitive EV landscape. Disappointing local sales, coupled with an intensifying price war among Chinese EV makers, have led to a significant loss of market share for foreign automakers.

Moreover, the technological edge once enjoyed by foreign automakers in China is being blunted, as Chinese EV producers ramp up investments in developing in-car software and autonomous-driving systems that have proven popular with mainland consumers.

Luxury Market Slowdown

Mercedes isn’t alone in feeling the squeeze. Other luxury brands like Porsche, Ferrari, and BMW have reported reduced sales in China earlier this year. The downturn in China’s property sector and a lackluster economy have put a damper on luxury spending across the board.

In response to these market conditions, Mercedes in July cut the outlook for its mobility business. The company cited difficulties in the Chinese market, higher costs of charging infrastructure, and ongoing trade tensions between Europe, China, and the U.S. as key factors influencing this decision.

BYD’s Rising Star

While Mercedes retreats, BYD has emerged as a national champion within China’s auto manufacturing sector. The company has expanded to several overseas markets where it now competes with companies including Mercedes and Tesla. BYD’s commitment to Denza is evident in its sales figures – the company has sold more than 200,000 units of its D9 model in the period after Mercedes first cut its stake in the venture.

Looking ahead, Denza’s new four-door EV and hybrid Coupe Z9 GT is scheduled for a September 20 launch. The new vehicle is priced competitively, with list prices ranging between 339,800 yuan and 419,800 yuan, equivalent to $47,800-$59,180.

EVXL’s Take

Mercedes-Benz’s exit from the Chinese EV joint venture underscores the intense competition and rapid evolution of the electric vehicle market. While established luxury brands struggle to maintain their foothold, domestic players like BYD are gaining significant ground. This shift mirrors trends we’ve seen with other automakers like Tesla, who’ve had to continuously adapt their strategies to succeed in the complex Chinese market.

The challenges faced by Mercedes in China highlight the importance of agility and local market understanding in the EV industry. As we’ve seen in our coverage of BYD, domestic manufacturers are leveraging their deep understanding of local consumer preferences and government policies to outmaneuver global competitors. It’ll be fascinating to see how other global brands navigate these challenges and whether they can reclaim their footing in one of the world’s most crucial markets.

What’s your take on Mercedes-Benz’s decision to exit the Chinese EV market? Do you think other luxury brands will follow suit? Share your thoughts in the comments below.

Photo courtesy of Denza / BYD