BMW is counting on its long-delayed Neue Klasse electric vehicles to revive its business in China after two consecutive years of declining sales. By the time the new models arrive, however, analysts question whether the world’s largest EV market has already moved ahead.

The pressure increased last month after BMW, under new CEO Milan Nedeljkovic, issued a surprise profit warning that partly cited China. It was the company’s third profit warning in less than three years. On Friday, BMW reported a 30% drop in second-quarter sales in the country, highlighting the pressure in one of its most important markets.

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China’s EV Market Has Changed

Analysts say BMW has taken too long to bring Neue Klasse, or “new class,” electric vehicles to market. Chinese automakers now develop increasingly advanced models in as little as 18 months, roughly half the development time of many traditional manufacturers, while consumer expectations have shifted just as quickly.

“If this had launched two years ago, it could have been a game-changer,” said Yale Zhang, managing director of Shanghai-based research firm Automotive Foresight. “In today’s Chinese auto market … it is hard to stand out.”

Premium branding alone is no longer enough. Chinese buyers increasingly expect advanced software, seamless digital services and distinctive in-car technology from domestic brands such as Nio, which demonstrated its flagship ET9 sedan’s suspension system by driving over speed bumps with a tower of champagne glasses on the bonnet without spilling a drop.

Traditional Strengths Lose Their Edge

BMW’s engineering heritage and reputation for combustion-engine performance have long supported strong margins in Europe and the U.S. In China, those strengths carry less weight as more buyers turn to domestic brands such as Nio, Geely’s Zeekr and Xiaomi.

“Chinese consumers no longer buy into that,” said Wang Xianbin, vice president of the Gasgoo Research Institute.

Those brands are now competing directly for customers who once would have defaulted to BMW, Audi, Porsche or Mercedes-Benz. The sales figures reflect that shift. Fully electric vehicles account for only about 5% of BMW’s sales in China, according to Global Mobility, while EVs represent 46% of total vehicle sales in the country. BMW’s China sales declined in both 2024 and 2025. Mercedes-Benz reported a 28% drop in first-half sales this year, while Audi sales fell 19%.

Discounts Are No Longer Enough

Hendrik Schmidt of DWS, one of BMW’s top-10 investors, said the company appears to have underestimated the pace of change in China. He also said direct experience in the market among senior executives and board members remains limited.

“From our perspective, the dynamics here have been considerably underestimated,” he said.

A BMW spokesperson disagreed, saying senior management has extensive experience in China and that the company’s strategy focuses on “highly integrated digital services, advanced connectivity features, and rear-seat comfort.”

According to Shanghai consultancy LandRoads, BMW’s average transaction price in China in 2025 was 341,000 yuan, or about $50,200. That was below local brands including Nio, Aito and Denza. Among German premium brands, only Audi’s average transaction price was lower, at 287,000 yuan.

BMW said it reduced some list prices during the first quarter in coordination with local authorities and noted that independent dealers remain free to determine discounts and final sales prices. Analysts, however, say price cuts alone are no longer enough.

“Chinese consumers today don’t just pick a car based solely on deep discounts,” Wang said.

Zhang added that local competitors are “armed to the teeth with cutting-edge features.”

Neue Klasse Faces Its Biggest Test

Neue Klasse sits at the center of BMW’s electric vehicle strategy. The platform is expected to underpin 40 new models by next year and has already generated encouraging early demand in Europe. Its China rollout, however, was delayed after BMW replaced its in-house assisted-driving technology with systems developed by Chinese partner Momenta, a capability many local buyers now consider essential rather than optional.

BMW said it takes a different approach to so-called China speed, emphasizing extensive testing throughout development to ensure safety. Some analysts argue the market has already moved beyond BMW’s original vision. Wang said he first heard about Neue Klasse four years ago and believes the company’s focus on range anxiety no longer reflects what Chinese buyers care about.

“That was a concern from two or three years ago,” said Chang Yan, founder of the EV-focused Weibo blog Supercharged.

He said the qualities traditionally associated with BMW in Europe, including driving dynamics and performance, matter less in China, where domestic manufacturers have become “far more aggressive in design and features.”

BMW is now trying to regain ground in a market where software, technology and locally developed features increasingly matter more than traditional premium branding.

“Overall, it’s clear that BMW is one step behind,” Wang said.