2026 JANUARY ISSUE
COMPETITIVENESS
OF
CHINA MARKET
Written by ANDREW SIA
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From the Desk of the Publisher
China is the second-largest consumer market, only second to the United States. Its market has slowed down because of its depressed housing market and also its job market has weakened.
Chinese market is also congested with international brands, and they are all gearing up for competition, not only among themselves, but also with those Chinese homegrown brands.
We show an example in the electric vehicle market, where BYD, its local brand is taking over the market, both local and international, and yet Volkswagen is going for their strategy — “In China, for China.”
The last we heard that VW is going into partnership with XPENG, and manufacturing will begin in 2026. It is also going to develop its own chips for advance driver-assistance systems and autonomous driving through a joint venture with a Chinese company.
Many companies can’t afford to ignore the country of 1.4 billion people, also known for the world’s second-largest consumer market. Even if the market is considered as lackluster with its many challenges, it is still a market that we can’t ignore.
The foreign companies who are presence in the China market have accepted the new reality as those days for making easy money were gone, and competitions are getting fiercer. It is no longer among the international brands, but also from the local upcoming brands.
Because of its economy has slowing down, consumers are becoming choicer, and the introduction of the local rivals have driven the price war that the margins have reduced.
International brands are becoming more realistic although their strategies may vary from one another. This includes tailoring products for the market, producing them at a faster pace, and marketing with lower prices.
China market was known for its economy expanded rapidly and millions joined the middle and upper classes. Brands like LVMH, Nike, Apple, and Starbucks were facing very little competition from Chinese brands. This was before the pandemic, but now the market has changed, and homegrown brands are overtaking Western brands in many industries.
Starbucks have found local rival like Luckin Coffee who is operating more shops in China. Starbucks announced lately that it was selling a major stake in its Chinese business to a Chinese private-equity firm Boyu Capital.
We now move to Guerlain, an LVMH-owned French luxury perfume, cosmetic, and skin care company. It is facing local competitors now. It is going to launch a lipstick cost around $56 to attract young consumers. It is also working with Chinese artists and social media platforms to promote products in a more localized way.
IKEA, the Swedish furniture retailer is going to lower prices for more than 150 bestselling items. It is also planning to launch 1,600 new products for Chinese consumers.
The saying is that “If you don’t compete with them in China, you will still have to compete with them outside China.”
We are going to show a case study of Estée Lauder’s successful story in China. You can refer to the following.
The New York-listed company’s high dependence on China consumers—both in the country and in its travel hub across China—has backed fire during a prolong slowdown in spending in the country. It has been caused by a depressed housing market and the job prospects.
The family-controlled Estée Lauder also own Mac, Clinique, and Tom Ford, made almost a-fifth of its $14.3 billion revenues in China last year. Over the past year, it launched skincare brand The Ordinary in China, opened a key store of its cosmetic brand Aveda in Shanghai and new stores for Le Labo fragrances. Its adjusted operating profit fell by 28% to $1.15 billion last year, which was its third consecutive annual decline. It found itself losing position as the world’s leading premium beauty brand to L’Oréal in 2023.
Its organic sale returned to growth in the three months to October, rising by 3%, compared with a 13% decline over the previous year. Its return in growth is triggered by fragrance sales, up by double-digit percentages.
Its newly promoted chief executive, La Faverie, is pushing through a $1 billion cost-saving plan which includes cutting 5,800 to 7,000 jobs. This will strip out layers of management and reduce headcount to expedite decision-making, as well as increase speed to market. This has been seen as slow in comparison with L’Oréal and LVMH-owned beauty retailer Sephora.
The multinationals are gearing up for competition, and most apparent the fiercest competition is the auto industry where local companies have taken away the market share from long-dominant foreign car brands.
Take for instance, Volkswagen was once the top carmaker in China, but since 2023, BYD, the local brand took over. Volkswagen has been using the strategy— “In China, for China” in developing and manufacturing models for Chinese consumers. It is now going to develop its own chip for advanced driver-assistance systems and autonomous driving through a joint venture with a Chinese firm.
The picture is showing Volkswagen’s factory in Hefei, and it is investing heavily in engineering capacities in China as it is considering China to be the most innovative hub for autonomous driving.
It is said that Volkswagen can produce an electric vehicle made in China for half the cost. VW is preparing to launch about 30 new EV models in China over the next five years using localized research and development. The cost with making EVs in Germany is 2023, with some models made in China had been reduced by 50%. This is due to the supply chain efficiencies, battery procurement, shorter development periods and lower a lot cost.
It has already invested billions in its innovation center in Hefei, eastern China, where it has more than a thousand advanced laboratories for testing software and hardware.
VW’s chief technology officer, Thomas Ulbrich, said the new research and development facility gave the engineering team an entire new level of integration, and can run software, hardware, and fill-vehicle validation processed in parallel, and this shorten the decision loops and bring innovations to maturity much faster. This has shortened the traditional process of about 50 months by 30%.
VW was many years the biggest carmaker in China but has lost market share as innovative Chinese Ev rivals won over consumers. It still has about 20% market share for cars with internal combustion engines. It doesn’t rank the top ten pure battery and plug-in hybrid carmakers in China.
VW decided to stay in the China market and since 2022 it has ploughed almost $4 billion into China in its market which is rapidly moving into EVs. It has planned to reduce its headcounts in Germany by 35,000 by 2030 as auto demand would weaken in Europe. VW is working on increasing exports of China-made car to increase its revenue. We found that it is the most determined automaker to have a strong foothold in China.