BMW and Porsche have a China problem. They're not the only ones.

• Porsche and BMW are the latest automakers to report sliding sales in China.
• The rapid rise of domestic EV makers such as BYD has put the squeeze on foreign competitors.
• Volkswagen, Toyota, and Honda have all suffered, and GM took a $5 billion hit on its Chinese business.

Porsche and BMW have become the latest European carmakers to report sliding sales in China.

The two German automakers said on Monday that sales in the world's largest auto market fell by 28% and 13.4% respectively in 2024 compared with the previous year, with Porsche blaming a "continuing challenging economic situation" in China for the slump.

The hit in China was so large that it reduced Porsche's global deliveries by 3%, despite growth in every other market.

Porsche and BMW aren't the only automakers to witness an alarming plunge in their Chinese sales in recent months.

Volkswagen, Porsche's parent company, posted an 8.3% decline in sales in China, its largest market, in 2024. Mercedes reported a 7% annual, while Japanese rivals Toyota and Honda also suffered sizable declines in deliveries.

Once dominant in China, foreign automakers are being increasingly squeezed by local competitors, with the likes of BYD and Xiaomi offering high-tech electric options at very affordable prices.

Known for affordable EVs such as the $10,000 BYD Seagull and the $30,000 Xiaomi SU7, many of these companies are now expanding into the luxury market, putting them in direct competition with European manufacturers such as Porsche and BMW.

BYD has released several luxury models under its Yangwang line, including the pothole-hopping U9 sports car and the drone-carrying U8 SUV, while Xiaomi launched a $114,000 luxury version of its best-selling SU7 sedan in October.

That's put foreign manufacturers like Porsche and BMW, which both counted China as their second-largest market in 2023, in a bind. Many are now rolling back their investments in the country and tearing up their strategies as a result.

General Motors said in December it would take a hit of more than $5 billion on its business in China, with the Detroit automaker closing factories and cutting costs at its joint venture with China's SAIC Motors after it lost $347 million in the first nine months of 2024.

Other brands have fostered closer ties with Chinese companies. Volkswagen announced last week it would partner with electric vehicle maker Xpeng to build a network of super-fast charging stations throughout China.

Porsche and BMW did not immediately respond to requests for comment from Business Insider.