The Georgia Hedge: Why German Premium Carmakers Are Shrinking in China and Building in America

by Francis Rozange | Nov 5, 2026 | 0 comments

On Saturday 24 October 2026, at a campaign rally in Perry, Georgia, President Donald Trump announced that a German premium carmaker would build its first factory in the United States a short drive away, on a megasite in Peach County. “Think of that. 200,000 cars a year. That’s incredible,” he told the crowd, according to the Associated Press. A release issued the same day by the office of Governor Brian Kemp put the investment at about $4 billion and the workforce at about 4,500. The company confirmed the next day that the plant is designed for up to 200,000 vehicles a year, with construction to begin in 2027 and production planned for the early 2030s.

It arrived in a reporting season that had told a different story about the other half of the German premium business. Between 7 and 13 October, four German premium brands published third-quarter or nine-month delivery figures, and in every case China was the weak point. One luxury carmaker’s China sales fell 31 percent in the quarter, after a 30 percent fall in the second quarter. A sports car maker’s China deliveries were down 33 percent over nine months, pulling its global total down 16 percent. Read together, the figures describe an industry pulling back from the market that financed its last expansion and reaching for one where tariffs reward local assembly, on two very different clocks.

Four October reports with the same weak point

The Stuttgart-based luxury carmaker reported on 7 October that it had sold 407,200 passenger cars worldwide in the third quarter of 2026, 8 percent fewer than a year earlier. Its China sales fell 31 percent to 86,800 units. Outside China its car sales rose 1 percent, the third consecutive quarter of growth there, with Europe up 5 percent to 168,700 units and the United States up 6 percent. Battery-electric deliveries rose 61 percent to 68,400 and reached a record 16.8 percent of global car sales. Over nine months the group sold 1,244,400 cars, down 7 percent. The company attributed the China decline to intense competition and a challenging market.

The Munich-based group published its figures on 13 October. It delivered 551,072 vehicles in the quarter, down 6.3 percent, with China down 24.8 percent to 114,355 units while Europe rose 2.7 percent and the United States 2.5 percent. The Ingolstadt-based premium brand, which shares a parent group with the sports car maker, delivered 314,905 vehicles in the third quarter, 19.7 percent fewer than a year earlier, according to figures reported by the German Press Agency on 12 October. Its nine-month total was about 1.04 million, down 11.4 percent. Its China sales over nine months fell by nearly a quarter and its American sales by around a sixth, a double blow for a brand with no factory in the United States.

The arithmetic of a compounding decline

The fall of 31 percent comes on top of an earlier one. The luxury carmaker’s China sales were already falling a year ago: the Associated Press reported in December 2025 that its unit sales in China had dropped 27 percent in the July to September quarter of 2025. A further fall of 31 percent on top of that leaves third-quarter volume at roughly half its level of two years earlier, a calculation from the two published rates rather than a company figure. The group’s China sales fell 19 percent in 2025 to 551,900 cars, and its quarterly declines in 2026 have widened from 27 percent in the first quarter to 30 percent in the second and 31 percent in the third.

Base effects usually flatter a company in its second bad year, because the comparison becomes easier. Here the opposite has happened, which suggests the problem is structural rather than seasonal. On the company’s own figures, China accounted for almost 31 percent of the luxury carmaker’s passenger car sales in 2025 and for about 21 percent in the third quarter of 2026. For the Munich-based group, on the same calculation from published totals, China’s share of deliveries fell from about 25 percent in 2025 to about 21 percent in the third quarter of 2026. They describe a market that has gone from the largest single source of volume for German premium makers to one that remains large but no longer sets the rhythm of their factories.

A home market contracting at the showroom

The Chinese market itself is shrinking at retail. The China Passenger Car Association reported on 12 October that retail sales of passenger vehicles fell 28.0 percent year on year in September 2026 to 1.618 million, a monthly count that superseded a preliminary estimate of 1.702 million and a 24 percent fall published two days earlier. Over the first nine months retail sales were 13.33 million, down 21.7 percent. New energy vehicles, the Chinese category covering battery-electric, plug-in hybrid and range-extender cars, made up a record 67.0 percent of retail sales in September. The shrinking pool of buyers is therefore also moving away from the combustion powertrains on which most German premium volume in China still rests.

The industry’s wholesale figures look much less alarming, and the difference is instructive. The China Association of Automobile Manufacturers, which counts factory shipments rather than retail sales, reported passenger vehicle sales of 19.96 million in the first nine months of 2026, down only 6.1 percent, alongside exports of 7.167 million, up 70.6 percent. Domestic manufacturers have the scale to send their surplus abroad. A foreign premium brand selling inside China has no such outlet and depends on Chinese households who are buying fewer cars. The passenger car association, for its part, cited a high comparison base, after a rush to buy before subsidies expired in some provinces in September 2025, and high oil prices weighing on petrol cars.

Where the Chinese premium buyer went

The premium segment has also shrunk. Analysts at a major credit rating agency, cited by the Associated Press in December 2025, estimated that premium cars, usually defined in China as those priced above 300,000 yuan, reached about 15 percent of total sales in 2023 before slipping to 14 percent in 2024 and 13 percent in the first nine months of 2025. Inside that smaller segment, the nationality of the winners has changed. China Daily reported that Chinese brands held more than 80 percent of sales of new energy passenger cars priced above 300,000 yuan. The China Association of Automobile Manufacturers put Chinese brands at almost 70 percent of all passenger car sales in the first eleven months of 2025, against 12 percent for German brands.

The challengers have taken share in exactly the price band where German saloons and SUVs once commanded a premium for the badge alone. China Daily reported that one domestic premium brand delivered 376,700 vehicles in the first eleven months of 2025 at an average transaction price of about 400,000 yuan, and that another sold about 277,900 at an average of 342,000 yuan. Shareholders of the luxury carmaker raised the problem at its annual meeting in April 2026. According to a report in Hong Kong’s The Standard, two large German fund managers warned that a product strategy led from the top of the range could hamper recovery in China.

Price cuts reach the top of the range

Competition has forced the incumbents to cut list prices, an unusual step for brands whose pricing power was part of their identity. The Munich-based group lowered list prices on 31 core models from 1 January 2026, most of them by more than 10 percent, according to Jiemian, a Chinese business news site, and Chinese automotive trade press reported in February 2026 that the luxury carmaker had cut prices on core saloons and SUVs in early February by roughly 33,000 to 69,000 yuan. The German Press Agency attributed the Ingolstadt-based brand’s third-quarter decline to sluggish demand and intense price pressure in China. Cuts of that size protect volume for a quarter or two, but they also reset what buyers expect to pay, new and used.

Residual values are where a price war turns into a brand problem. The Associated Press described a 2024 German luxury four-door listed on the Chinese used market at 950,000 yuan, against the roughly 1.4 million yuan its previous owner had paid, a loss of about a third. When a premium customer begins to assume that the list price is only the starting point of a negotiation, and that the car will lose a third of its value quickly, the brand has lost something that is slow to rebuild. Dealers who bought stock at the old prices absorb the first losses, which helps explain why network reductions have followed the sales figures so closely.

Tax changes that matter less than they appear

Chinese tax policy has moved at the margin. From 20 July 2025, the Ministry of Finance and the State Taxation Administration lowered the threshold for the 10 percent consumption tax on ultra-luxury cars from 1.3 million yuan to 900,000 yuan, and battery-electric and fuel-cell cars above the threshold are taxed at the retail stage. For new energy vehicles, the full purchase tax exemption that applied in 2024 and 2025 became a halved tax from 1 January 2026, with relief capped at 15,000 yuan per car under the policy announced in June 2023. A 2 percent consumption tax on lithium-ion batteries, ending an exemption in place since 2015, took effect on 1 September 2026 and is due to rise to 4 percent on 1 September 2027, under an announcement by the Ministry of Finance, the General Administration of Customs and the State Taxation Administration reported by Xinhua in July 2026.

None of these measures explains a 31 percent fall in a single quarter. The ultra-luxury tax applies above 900,000 yuan, a price at which German makers sell flagships and performance derivatives rather than the mid-size saloons and SUVs that carry their volume. The changes to new energy vehicle taxation slightly narrow the cost advantage of the electric and plug-in cars where Chinese brands are strongest, which in theory should help importers whose ranges still lean on combustion engines. That German sales kept falling regardless points to product and brand, rather than tax, as the decisive variable. Policy explains part of the market’s weakness; it does not explain who is winning within it.

The sports car maker chooses a smaller China

The sports car maker’s figures, published on 9 October, are the starkest of the four. It delivered 178,532 cars worldwide in the first nine months of 2026, down 16 percent from 212,509. China fell 33 percent to 21,493 units, the steepest decline of any region. North America, still its largest region, fell 13 percent to 56,088, Europe excluding Germany fell 11 percent and Germany 7 percent. Part of the global decline has nothing to do with China. Production of its smallest two-seater ended in October 2025 and production of the combustion version of its compact SUV ended in the summer of 2026. Its flagship rear-engined coupé was the exception, with deliveries up 12 percent to 42,217.

In China, the company has chosen to shrink rather than chase volume. It describes its approach as putting the long-term development of the brand ahead of short-term volume. Its local chief told a Chinese financial newspaper in January 2026 that the dealer network had fallen from 150 outlets to 114 during 2025 and would be cut to about 80 by the end of 2026, and that the company had no plans to build cars in China. Its China deliveries fell for a fourth straight year in 2025, by 26 percent to 41,938. On the published figures, China accounted for 15 percent of its deliveries in 2025 and 12 percent in the first nine months of 2026, a reduction in exposure that is partly chosen and partly suffered.

Performance holds while the middle gives way

One detail in the October releases stands out. The Munich-based group said deliveries of its performance sub-brand were stable in China despite the declining market, and the sports car maker reported that demand for its flagship coupé, and for particularly exclusive and high-performance derivatives across its range, remained strong. The pattern suggests that the German brands still hold an advantage where the purchase is driven by driving dynamics, motorsport heritage and scarcity, and that they are losing ground in the broad middle of the premium market, where Chinese buyers compare screens, software, driver assistance and price. That is a narrower franchise than the one German makers built in China, but it is also one that local rivals find harder to copy quickly.

A narrower franchise needs fewer showrooms, and the contraction of the networks has not always been orderly. One of the sports car maker’s dealerships in Zhengzhou ceased operations on 31 December 2025, and its parent company blamed weak economic conditions, consumer downtrading and intense price competition, according to Jiemian. Customers were notified only on 5 January 2026. Fewer outlets can help defend price, because less stock competes for the same buyers and fewer dealers are pushed into discounting to meet targets. But closures handled abruptly damage the service relationship on which a premium brand’s reputation rests, so the manner in which a network shrinks matters as much as its final size.

Localisation as the alternative to retreat

The other German groups are betting on localisation rather than contraction. According to The Standard, the luxury carmaker plans seven new models for China by 2027 and a roll-out of driver-assistance systems co-developed with a Chinese technology company, and its finance chief has set a medium-term goal of 500,000 to 600,000 China sales a year. The Ingolstadt-based brand announced on 22 October 2026 that from 1 November a Chinese executive who most recently led a brand at a domestic carmaker would become president of its China business, jointly leading a streamlined board and continuing what the company calls its dual-brand strategy. The Munich-based group said the China version of its new electric SUV would begin rolling out in November.

The common thread is that most German premium makers are trying to become more Chinese in order to stay in China, while the sports car maker prefers to remain distinctly German and accept a smaller market. The upper end of the luxury carmaker’s medium-term range is close to the 551,900 cars it sold in China in 2025, while its third-quarter sales, repeated for four quarters, would amount to about 350,000. Localised technology partnerships can close the gap in software and driver assistance, but they may also blur what the German badge stands for. A Chinese-led management team may read the market more accurately while raising questions at home about where product decisions are made.

The other side of the ledger

Outside China, the same reports read very differently. The luxury carmaker’s car sales outside China rose for a third consecutive quarter, and in Europe it reported record quarterly battery-electric sales, up 78 percent. Several of its new electric models were reported to be sold out in Europe for the rest of the year, with plants in Bremen, Rastatt and Kecskemét working three shifts. The Munich-based group grew in both Europe and the United States during the quarter, and in Europe fully electric models accounted for 34.7 percent of its deliveries, roughly one in three. These figures matter for the China story because they show that the retreat is regional rather than general.

The United States has become the growth market that China used to be, though at a much slower tempo. The luxury carmaker’s American sales rose 6 percent in the third quarter and 12 percent over nine months. The Munich-based group’s American deliveries rose 2.5 percent in the quarter to 106,741 and 3.4 percent over nine months to 307,402. The brands without American factories fared worse. The sports car maker’s North American deliveries fell 13 percent over nine months, a decline it attributed mainly to the end of its smallest two-seater and a strong prior-year comparison for its electric compact SUV. The Ingolstadt-based brand’s American sales fell by about a sixth, and the dpa report pointed to import tariffs as the reason.

Why a megasite in middle Georgia

The Georgia plant is the clearest response yet to that asymmetry. According to the governor’s office, the facility will be built on the Middle Georgia Megasite in Peach County, developed by a joint authority of Peach, Houston and Macon-Bibb counties, and will make premium SUVs for North American customers. Grading is scheduled to begin in 2027, construction in 2028 and full production in 2031, at 200,000 units a year. The company’s own release says construction starts in 2027 and production in the early 2030s. At the rally the president spoke of a commitment of $4.2 billion, according to the Associated Press, against the roughly $4 billion given by the state and the company.

The company has been candid about the economics. Its release of 25 October described the United States as the world’s second-largest premium car market and presented local production as a way to reduce exposure to trade and currency risks, making North America a third production pillar alongside Europe and China. A further statement on 26 October said its American business is currently not profitable. For a brand whose third-quarter deliveries were 19.7 percent lower than a year earlier and about a third below the nearly 480,000 it delivered in the third quarter of 2023, the logic of building where tariffs no longer apply is plain.

A factory announced at a campaign rally

The setting became part of the story. The Associated Press reported that it came in the final days before the midterm elections of 3 November 2026 and seemed timed to offer a last-minute boost to Republican candidates in a battleground state, and that the president credited his tariff policies for the decision. On 26 October the company published a statement on what it called the current situation. It explained that its delegation had been in Georgia for talks and had been asked to present its plans publicly alongside the president, and that it had accepted with only the company’s interests in mind. It acknowledged that the circumstances might have been perceived as a political signal and said it took that perception very seriously.

The same statement said that a stronger American business was not a decision against Germany. That sentence was written for an audience at home, and it shows how a site decision has become a positioning question in several countries at once. A German premium brand now has to explain an American factory to German employees and politicians, a Chinese-led management team to German shareholders, and its German identity to American and Chinese buyers who will increasingly receive cars assembled outside Germany. Each audience hears a different message in the same announcement. A message tailored to one of them now reaches all the others instantly.

The tariff that changed the calculation

In April 2025 the United States imposed a 25 percent tariff on imported cars under Section 232, on top of the 2.5 percent duty that European cars had paid before. Under the framework agreed by the United States and the European Union in the summer of 2025, a notice published in the Federal Register on 25 September 2025 set the total tariff on covered EU cars and parts at 15 percent or the most-favoured-nation rate, whichever is greater, applied retroactively to 1 August 2025. Reuters noted at the time of the July 2025 agreement that the new rate was six times the old 2.5 percent duty, though well below the 27.5 percent European exporters had been paying in the meantime.

The arrangement has not been stable. On 1 May 2026 the president announced that he would raise the tariff on EU cars and trucks to 25 percent, accusing the bloc of non-compliance, and on 7 May he set a deadline of 4 July. The European Union completed its legislation before that date. The Council formally adopted the implementing texts at the end of June, and Regulation (EU) 2026/1455, which removes EU duties on American industrial goods including vehicles, was published in the Official Journal on 30 June and entered into force on 1 July. A regulatory summary of 16 July described EU cars as facing a 15 percent all-inclusive ceiling. The regulation expires at the end of 2029 unless extended.

Builders and importers

The tariff divides the German premium industry into builders and importers. The Munich-based group assembled 412,799 SUVs at its plant in Spartanburg, South Carolina, in 2025, against a capacity of up to 450,000, and shipped about half of its output to nearly 120 markets. It describes itself as the largest American automotive exporter by value, with $9 billion of exports in 2025. The luxury carmaker announced on 1 April 2026 that it would invest $4 billion in its Alabama plant through 2030, adding a new core-segment model from 2027, as part of a plan exceeding $7 billion across its American operations. Both groups had their American factories long before tariffs made them indispensable.

The importers have paid the price. Reuters reported in July 2025 that the sports car maker had raised American prices by between 2.3 and 3.6 percent and flagged a tariff cost of $462 million for the first half of that year, while saying it had no plans to build cars in the United States. Even builders pay on the models they still ship from Europe: Reuters reported that the luxury carmaker’s 2025 results were marred by about €1 billion in tariff costs. The Ingolstadt-based brand is the only one of the four without an American plant to have committed to building one, and its plant will not reach full production until 2031.

Five years is a long time in trade politics

The timetable is the weakest part of the American half of the story. Full production in Georgia is planned for 2031, after the 2028 presidential election and after the European regulation implementing the trade deal is due to expire at the end of 2029. A tariff on European cars that moved from 2.5 percent to 27.5 percent and then to 15 percent within 2025, and was threatened with a rise to 25 percent in 2026, is an uncertain foundation for an industrial asset meant to run for decades. The company’s own justification cites currency risk and the size of the American premium market as well as trade, which makes the investment less dependent on any single decision taken in Washington.

There is also the question of what the plant will build and for whom. The company speaks of premium SUVs tailored to North American customers, and the Associated Press reported that its chief executive said the plant would build the brand’s biggest and most premium SUVs. That choice implies that, for the rest of this decade, the brand’s American range will continue to be imported and exposed to whatever tariff then applies. The premise of a German premium march into America therefore needs qualifying: the advance is real, but for now it consists of a site, a budget and a timetable rather than a production line.

What delivery figures cannot tell an analyst

Quarterly deliveries tell an analyst how many cars left the dealer, not why a buyer chose another one. The distinction matters because the remedies differ. If Chinese premium buyers have turned away from German cars because of software and driver assistance, localised technology partnerships are the right answer. If they still respect the badge but no longer see why it should carry a price premium over domestic rivals, the answer lies in pricing, residual value management and the quality of the dealer experience. If the main problem is the powertrain, with combustion cars losing ground as new energy vehicles pass two-thirds of retail sales, only the product cycle can fix it.

Separating those explanations requires evidence that sales data cannot supply. Structured customer research among recent premium buyers, including those who considered a German car and bought a domestic one, combined with competitive research on how local rivals construct their price ladders and specification bundles, would show which attributes still earn a premium for the German brands and which have become standard expectations. This is the kind of question CSM International’s automotive research practice is built to frame. The sales data already show that the German brands are losing share. The more useful question is which part of their proposition has stopped converting interest into purchase, and in which cities, price bands and buyer profiles the loss is concentrated.

The badge on an American-built SUV

The American side raises its own positioning question. German premium brands have built SUVs in the American South for decades, and the Munich group’s export record suggests that buyers in nearly 120 markets accept a car built in South Carolina as a German product. That precedent indicates that the place of assembly matters less to premium customers than the engineering story, the product itself and the dealer experience. It does not prove that the same tolerance extends to every brand or every segment. A brand whose identity rests on technical progress engineered in Bavaria will have to decide how much of that narrative it keeps when its largest and most expensive SUVs begin to come from Peach County.

The political framing adds a variable that price and product do not capture. A plant announced at a campaign rally can be read in the United States as a vote of confidence in American workers, in Germany as a concession to tariff pressure and in China as a sign of where a brand’s priorities now lie. Measuring those readings separately, through surveys of intending buyers in each market and the kind of content analysis CSM International applies to media and social coverage, would show whether the episode has cost anything in brand esteem or simply produced a week of headlines. The company’s own statement of 26 October suggests that it is aware of the risk.

The indicators that will settle the question

Several indicators will show whether the October picture is a trough or a trend. The passenger car association’s monthly retail data will show whether the trade-in subsidies it expects to increase later in the year lift the market, and the fourth-quarter delivery reports in January 2027 will show whether German declines in China narrow against a softer base. The luxury carmaker’s new China models, the Munich group’s electric SUV built for China and the Ingolstadt brand’s Chinese-led management, in place from 1 November 2026, will all be tested against domestic rivals during 2027. In the United States, the variable is political: whether the 15 percent ceiling on European cars survives until the first SUVs leave the Georgia plant.

The October figures describe two processes moving at very different speeds. The retreat from China is visible in the sales data now, quarter after quarter, while the advance into the United States exists mainly in investment plans whose output will arrive between 2027 and 2031. The state’s release notes that industrial utilities are already adjacent to the Georgia site, and the head of a local orchard business said it hoped people would think of Georgia peaches when they think of the brand. What eventually grows on that land will depend on decisions taken in Washington and on what Chinese buyers decide a German badge is worth.