In 2026, China’s luxury car market has entered a phase of in-depth differentiation and reshuffling. First-tier luxury brands cut prices aggressively to sustain sales volume, while local new energy vehicle startups forge ahead strongly with advanced technologies and integrated ecosystems. Caught in the middle, second-tier luxury brands have lost their strategic buffer zones and fallen into a dilemma. Sticking to fuel-powered vehicles means continuous market share erosion; accelerating electrification transition, however, is constrained by insufficient product reserves, intelligent system shortcomings and solidified brand perception, making it difficult to gain a foothold in the high-end new energy market.
Volvo’s Greater China sales plunged 17% year-on-year in the first quarter of 2026, serving as a typical reflection of the overall predicament facing second-tier luxury brands. Against this backdrop, Volvo, a long-standing player in the high-end luxury market, unveiled two flagship pure electric models, the EX90 and ES90, at the Guangdong-Hong Kong-Macao Greater Bay Area Auto Show, launching a high-profile offensive in the premium pure electric segment to break its transformation deadlock. Nevertheless, amid rampant price wars, a shrinking window for electrification transformation and intensified market competition, whether this new breakthrough strategy can deliver stable market performance remains to be verified.
Second-Tier Luxury Brands Lose Their Last Safe Haven
China’s new energy vehicle market has entered a new developmental stage. According to data from the China Passenger Car Association (CPCA), the retail penetration rate of new energy passenger vehicles in China exceeded 60% for the first time in April 2026, reaching 61.4%, while the penetration rate of domestic independent brands hit as high as 80.1%, marking electrification and intelligentization as the mainstream trends of the industry.
In sharp contrast to the robust growth of domestic brands, foreign luxury brands have lagged far behind in transformation, landing in an awkward market position. CPCA statistics show that retail sales of luxury cars in China stood at 140,000 units in April 2026, down 16% year-on-year and 33% month-on-month, with a new energy penetration rate of merely 26.1%, far below the overall industry average. In the industrial shift from fuel to new energy vehicles, the traditional pricing power and brand premium system of foreign luxury brands are undergoing comprehensive restructuring.
Persistent price cuts by first-tier luxury brands have completely squeezed the living space of second-tier players. Since 2025, BBA has witnessed a continuous decline in China sales: Mercedes-Benz delivered 575,000 units nationwide, a year-on-year drop of 19%; BMW sold 625,500 units, down 12.5%; and Audi achieved 617,500 units, a decrease of approximately 5%. The three top luxury brands lost a total of 260,000 units in market share over the year, pushing their overall sales back to the 2017–2018 level.
The downward trend intensified in the first quarter of 2026. Mercedes-Benz’s China sales tumbled 27% year-on-year to 111,600 units; BMW’s deliveries fell 10% to 144,000 units; and Audi’s sales dropped 12% to 127,100 units. To stabilize market performance, BBA launched large-scale promotional campaigns with slumping terminal prices. The entry-level price of the Mercedes-Benz GLB dropped to 144,900 RMB, the base version of the BMW i3 fell below 190,000 RMB, and some Audi A6L models offered discounts of over 150,000 RMB. The downward adjustment of first-tier luxury price ranges has directly overlapped with the mainstream pricing of second-tier luxury vehicles, leaving Volvo, Cadillac and other brands with negligible market room.
Volvo is not alone; the entire second-tier luxury camp is trapped in a vicious cycle of falling sales and shrinking profits. Brands including Cadillac, Jaguar Land Rover, Lincoln and Infiniti face universal pressures: their terminal transaction prices are highly overlapping with BBA, leading to shrinking brand premiums; their electrification and intelligent product launches lag behind industry pace; and they struggle to balance sales volume via price cuts and profit maintenance. Formerly popular models have depreciated sharply. The entry-level price of Lexus ES dropped to around 200,000 RMB before its facelift, while domestic Jaguar Land Rover and Infiniti models are sold at substantial discounts, signaling the complete disappearance of second-tier luxury brands’ traditional safe market space.
Li Yanwei, expert member of the China Automobile Dealers Association, pointed out the core crux: the decline of second-tier luxury brands essentially stems from uneconomical R&D investment. Small-volume premium brands cannot afford the high costs of electrification and intelligent technology research and development, resulting in lagging transformation, weak product competitiveness and a continuous downward market spiral.
Faced with existential crises, second-tier luxury brands have rolled out differentiated strategies. Volvo bets on multi-technology parallel development focusing on hybrid and pure electric tracks; Lexus accelerates local production in China; Jaguar Land Rover leverages Chery’s electric vehicle platform to compensate for technical shortcomings; Cadillac speeds up full-scale electrification transformation. However, industry insiders reach a consensus: simple price promotions or superficial electric vehicle launches cannot resolve fundamental problems. Only by restructuring product and organizational systems and deeply integrating into China’s intelligent new energy ecosystem can these brands survive the brutal elimination competition.
Volvo Bets Big on Future with Three Parallel Technology Routes
While most second-tier luxury brands struggle to survive, Volvo has adopted the most investment-intensive and challenging transformation path: the simultaneous iteration and development of fuel, hybrid and pure electric technology architectures to cover diversified market demands and build a full-dimensional product matrix.
Volvo currently deploys three core technical platforms in China. The SPA platform underpins fuel and plug-in hybrid models to stabilize its traditional market base; the SMA super hybrid architecture drives the growth of new energy vehicle sales; and the SPA2 native pure electric platform occupies the high-end flagship market. At the 2026 Beijing Auto Show, Volvo showcased eight models covering all technical routes, with a price range spanning from 159,900 RMB for the S60 to 598,000 RMB for the EM90, fully covering the mid-to-high-end luxury market.
Launched in May 2025, the SMA super hybrid architecture serves as the core pillar of Volvo’s new energy sales growth. The XC70, a mid-size plug-in hybrid SUV built on this architecture, is equipped with a 1.5T dedicated hybrid engine and a three-motor plug-in hybrid system, delivering a comprehensive power output of 340kW. It achieves a maximum CLTC pure electric range of 212 kilometers and a total comprehensive range of over 1,200 kilometers, perfectly meeting Chinese consumers’ needs for daily commuting and long-distance travel.
Since its launch in September 2025, the XC70 has accumulated over 20,000 sales in half a year, with a peak monthly sales volume of 5,354 units. Notably, more than 90% of consumers opted for the four-wheel-drive high-end version priced above 300,000 RMB, fully demonstrating Volvo’s solid brand premium capability and the initial success of its hybrid transformation strategy.
As Volvo’s core trump card for penetrating the pure electric era, the SPA2 native pure electric architecture defines its high-end competitiveness. It features a full 800V high-voltage platform with a maximum charging power of 350kW, enabling a 10%-80% fast charge in just 20 minutes, balancing efficient energy replenishment and superior dynamic performance. Equipped with a central centralized electrical and electronic architecture, it supports full-life-cycle OTA upgrades. Combined with self-developed third-generation electric drive systems, all-aluminum chassis and intelligent dual-chamber air suspension, Volvo builds differentiated advantages through solid mechanical quality rather than blind parameter stacking, standing out from industry involution.
Based on the SPA2 platform, Volvo unveiled its two pure electric flagships, the EX90 and ES90, in April 2026, which officially hit the market and realized platform mass production in May. The body torsional rigidity of the new models is 50%-60% higher than that of the previous generation. The aluminum-steel hybrid cage body further strengthens Volvo’s signature safety genes, extending its core brand advantage into the pure electric era.
High R&D Investment Brings Mounting Financial Pressures
While the full-scale multi-technology layout brings transformation increments, it also imposes heavy financial burdens and expanding losses. In 2025, Volvo recorded a net global loss of 2.968 billion Swedish kronor, its first annual loss in a decade. Its global annual revenue reached 357.3 billion Swedish kronor, down 11% year-on-year, while operating profits plummeted 99% to merely 30 million Swedish kronor.
As Volvo’s core market, Greater China faced even severer performance pressure. In 2025, Volvo’s China sales dropped only 4% year-on-year to 149,500 units, but its China revenue slumped 23% to 49.3 billion Swedish kronor, marking the largest decline across all global markets. The stark contrast between slight sales decline and sharp revenue drop vividly reflects the extreme profit squeeze on luxury brands amid China’s brutal price wars.
Volvo’s dilemma is universal across the second-tier luxury camp, which is mired in a downturn of falling sales and profits. In 2025, Cadillac’s China sales fell to around 100,000 units, halved from its peak; Jaguar Land Rover sold only 26,500 units, down over 20% year-on-year; Lincoln delivered 49,000 units, a 13.6% drop; Infiniti’s annual sales stood at just 1,406 units, virtually exiting China’s mainstream market. Parent company financial reports of most foreign automakers also revealed a sharp decline in profitability in China, reflecting the continuous shrinkage of second-tier luxury brands’ living space.
The structural divergence of Volvo’s transformation became more prominent in the first quarter of 2026. Its global sales fell 11% year-on-year to 153,300 units, while Greater China sales plunged 17% to 28,300 units. Nevertheless, its electrified vehicle sales in Greater China surged 116% year-on-year to 7,604 units, among which plug-in hybrid deliveries jumped 146%.
The contrasting data reveals Volvo’s transformation growing pains: its traditional fuel vehicle business is shrinking rapidly, while new energy vehicles are booming but still lack sufficient scale to fill the sales gap left by declining fuel vehicle sales, leaving the brand in a critical transitional phase of imbalance.
Volvo is also pushing forward brand upgrading and reshaping. Rooted in its core "safety" brand gene, it launched the new brand proposition of "intellectual superiority" and partnered with value-driven public figures including Guo Jingjing and Luo Xiang. This strategy extends its brand connotation from physical passive safety protection to psychological identity and value resonance, helping it get rid of homogeneous marketing involution.
Industry analysts note that Volvo’s predicament epitomizes the struggles of all second-tier luxury brands. Lacking the profound brand heritage of BBA and the agile digital and intelligent iteration speed of local new energy startups, these brands are trapped in a squeezed middle ground. Although first-tier luxury brands also face transformation challenges and loosened price systems, second-tier players have far weaker risk resistance and endure more severe market reshuffling pressure.
New Leadership Reform: Can Thirteen Years of Mercedes-Benz Experience Revitalize Volvo?
At the critical stage of transformation and market pressure, Volvo ushered in a core personnel reshuffle. In May 2026, Yuan Xiaolin stepped down after 16 years leading Volvo’s China business, while Duan Jianjun took over as President and CEO of Volvo Cars Greater China. He fully oversees the entire value chain including R&D, production, supply and sales, and joined the group’s global core management team, kicking off a new strategic layout for Volvo’s China business.
Duan’s appointment is regarded as a "return home" by the industry. His career started at Volvo, where he worked in after-sales service as a technician in his early years. He later held senior management positions at BMW and Mercedes-Benz, accumulating over 30 years of in-depth automotive industry experience, with sharp market insight and mature terminal operation capabilities.
His 13-year tenure at Mercedes-Benz constitutes his core professional highlight. Joining Mercedes-Benz Sales & Service in 2013, he became the first Chinese President and CEO of Mercedes-Benz’s sales company in 2023. During his tenure, he helped China become Mercedes-Benz’s largest single global market and achieved the milestone of double 5 million vehicle sales. He also led the localized development of 14 exclusive models and built benchmark long-wheelbase sedan product lines, accumulating rich experience in dealer channel management, market fluctuation regulation and brand tonality maintenance.
Notably, Duan led Mercedes-Benz through a period of stock market competition and adjustment. Mercedes-Benz’s China sales dropped 6.7% year-on-year to 714,000 units in 2024, and further declined 19.3% to 575,000 units in 2025, with annual revenue falling 28.6%. Facing severe performance pressure, he adopted a core strategy of "trade-offs" and adjusted business targets multiple times to accurately grasp market rhythms. This experience of managing brand operations during market downturns is exactly what Volvo urgently needs.
Unlike his previous role focusing solely on sales, marketing and channels at Mercedes-Benz, Duan’s authority at Volvo covers the entire industrial and commercial operation chain, including R&D, production, supply chain, sales and services. He is no longer limited to executing global headquarters’ strategies but can deeply participate in product definition, technology implementation and localized strategic formulation. Meanwhile, Volvo granted him dual seats in the global core management and global sales management teams, with direct reporting access to the China board, demonstrating the brand’s strategic emphasis and high expectations for China market breakthroughs.
With full operational authority, Duan faces multiple rigorous challenges: the continuous shrinkage of fuel vehicle business and insufficient large-scale growth of new energy products; eroding profits and loosening brand pricing systems amid fierce price wars; and the urgent need to reshape the traditional "safety" brand narrative for the intelligent electric era.
His dual core tasks are clear: in the short term, stabilize the terminal pricing system, ensure healthy development of dealer channels and consolidate the luxury market base; in the long term, drive the electrification transformation from quantitative growth to qualitative leap, scale up the competitive advantages of XC70 hybrid models and SPA2 pure electric platforms, and achieve large-scale breakthroughs in new energy business. His experience in strategic trade-offs, resource allocation and market control during his Mercedes-Benz tenure will serve as a key variable for Volvo’s breakthrough.
Conclusion
China’s 2026 luxury car market has bid farewell to incremental growth and entered a brutal stock elimination era. First-tier luxury brands consolidate market positions through price cuts, local new energy startups seize high-end market share rapidly, second-tier luxury brands face extreme compression of living space, and the window for electrification transformation keeps shrinking.
For Volvo, the foundation for transformation has been laid with a complete multi-technology product layout and a new core management team. However, it still needs to solve core problems: balancing the iteration rhythm of fuel and new energy products, resolving the conflict between price competition and brand premium, and rebuilding core brand competitiveness to break the middle squeeze dilemma of second-tier luxury brands.
Duan Jianjun’s appointment brings new possibilities for Volvo’s breakthrough. In the future, Volvo needs to not only boost sales volume, but also answer the ultimate brand question: why consumers should choose Volvo in the intelligent electric era. This is not only a transformation exam for Volvo itself, but also a breakthrough answer awaited by the entire traditional second-tier luxury camp amid market reshuffling.
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