Introduction

Some are exiting, while others are doubling down. Where does the future lie?

On March 26, 2026, Volkswagen China officially confirmed that its Skoda brand would exit the Chinese market by mid-2026.

This Czech automotive brand with a 130-year history has concluded its nearly two-decade journey in China. Skoda's departure poses an unavoidable and sharp question for all joint venture brands: In this new arena where Chinese automakers define the rules of the game, should they stay or go? If they stay, what path should they take?

Skoda's Two Decades in China: From Glory to the Margins

Skoda entered China in 2005. That year, the Chinese automotive market was on the brink of explosive growth, with annual sales nearing 6 million units, making it the world's second-largest automotive consumer market.

Through its partnership with SAIC Volkswagen, Skoda became the third brand produced by the Volkswagen Group in China, following Volkswagen and Audi. Leveraging its positioning as an 'affordable German brand' and technical support from the Volkswagen Group, Skoda quickly gained a foothold in the Chinese market. The period from 2016 to 2018 marked Skoda's golden era, with sales exceeding 300,000 units for three consecutive years, peaking at 341,000 units in 2018. At one point, China became its largest global market. During its peak, Skoda had a dealer network of over 500 outlets in China.

However, the turning point came in 2019. From then on, Skoda's sales in China began to plummet. Data shows that its sales dropped from 282,000 units in 2019 to just 15,000 units in 2025, a staggering decline of over 95% from its peak, with a market share of less than 0.1%.

The collapse of its distribution network was equally alarming. By the end of 2025, Skoda had only 78 dealers left in China, most of which were integrated into SAIC Volkswagen showrooms as 'store-within-a-store' operations, effectively losing their ability to operate independently.

The core reason for Skoda's collapse in China was officially attributed to its 'inability to keep pace with the electrification transformation of the Chinese automotive market.' Although it launched its first new energy SUV in 2020, it never established a competitive portfolio of new energy vehicles. By the time of its exit, Skoda had no domestically produced pure electric models in China, and its only hybrid models were retrofitted from internal combustion engine platforms, lagging significantly behind new energy products from domestic brands like BYD and Geely.

Even more fatal was Skoda's predicament of being 'squeezed from both above and below' within the Volkswagen Group's brand hierarchy.

On one hand, to compete with Chinese brands, Volkswagen's main brand significantly lowered the prices of models like the Lavida, Sagitar, and Passat, directly encroaching on Skoda's price range. With no price difference, consumers naturally preferred the more recognized Volkswagen brand.

On the other hand, in 2019, the Volkswagen Group elevated the Jetta from a single model to an independent brand, directly capturing the low-end market below 100,000 yuan.

In summary, Skoda could not break through its brand ceiling upward nor fend off the comprehensive encirclement of domestic brands offering intelligentization (intelligent features) and low prices downward. Its advantage of being an 'affordable German brand' completely lost its effectiveness.

Ironically, while Skoda was struggling in the Chinese market, it was thriving elsewhere globally. In 2025, Skoda's global sales surpassed 1 million units, up 12.7% year-on-year, marking three consecutive years of growth. Western Europe was its key market, with Germany being its largest single market. In India, Skoda's sales surged from 32,800 units in 2024 to 73,800 units in 2025, nearly doubling.

This contrast explains Skoda's strategic adjustment. The uniqueness and extremely rapid evolution of the Chinese market's demands for electrification, intelligence, and localization exceeded the adaptability of Skoda's global unified strategy. When maintaining a presence in China required massive resources for localized R&D and product iteration, redirecting resources to high-growth markets like India and ASEAN became a more rational business decision.

Moreover, against the backdrop of electrification transformation, Volkswagen needed to concentrate its resources to meet challenges. In China, the Volkswagen Group prioritized resource allocation to its core brands, Volkswagen and Audi, to accelerate the localized R&D of its ID. series electric vehicles.

Two Paths for Joint Venture Brands: Exit or Double Down

Skoda's exit raises a common question: Does this mean that 'exit' is the only path forward for joint venture brands in China? The reality is far more complex. The Chinese automotive market is undergoing structural adjustments, with clear differentiation among joint venture brands.

Overall, the market share of joint venture brands continues to decline. Data from the China Association of Automobile Manufacturers shows that in 2025, the market share of joint venture passenger vehicles in the domestic market dropped to 35.4%, a historic low. Meanwhile, domestic brands' retail share exceeded 65% for the first time in 2025, meaning that two out of every three vehicles sold were domestic brands.

Performance varied significantly among individual brands. Among Japanese brands, Toyota achieved a slight sales increase to 1.78 million units in 2025, becoming the only 'Big Three' Japanese brand to maintain positive growth. In contrast, Honda and Nissan continued their decline, with annual sales of 645,300 and 653,000 units, down 24.28% and 6.26% year-on-year, respectively, marking their fifth and seventh consecutive years of decline.

German luxury brands BBA faced sales pressure in 2025. Even with discounts as high as 30-35%, their total sales dropped from 1.814 million units to 1.615 million units, a decline of 11%.

American and Korean brands were increasingly marginalized, with Hyundai-Kia's market share in China falling to around 1%.

In contrast to Skoda's exit, a group of joint venture brands are increasing their investments in China and exploring new development models, with 'doubling down on China' becoming another path.

Dongfeng Peugeot Citroën (DPCA), one of China's earliest joint venture automakers, is at a critical turning point. In 2025, DPCA's operating scale grew by 7% year-on-year, showing signs of recovery. More importantly, its shareholders—Dongfeng Group and Stellantis—reached a new strategic consensus.

In October 2025, Stellantis and Dongfeng Motor supported DPCA's accelerated integration into Dongfeng's new energy business. They launched the 'DPCA Revival Three-Year Plan' (2026-2028). The first collaborative model is expected to launch in the first quarter of 2027, with a development cycle compressed to 18 months, less than half of the previous duration.

If DPCA represents a second act, Mercedes-Benz chose a path of deep localization. Mercedes-Benz has built the strongest R&D layout outside Germany in China, supported by its 'dual R&D engines' in Beijing and Shanghai. Over the past five years, it has invested over 10.5 billion yuan in R&D in China, with a local R&D team exceeding 2,000 people.

Tong Oufu, head of Mercedes-Benz Greater China, explicitly stated that they would 'accelerate integration into China's unique technology ecosystem: deeply fusing Mercedes-Benz's brand DNA with China's leading digital ecosystem.' From 2025 to 2027, Mercedes-Benz will launch seven China-exclusive models, expanding its domestically produced lineup to 20 models. In 2026, Mercedes-Benz plans to introduce over 15 new products in the Chinese market.

Mercedes-Benz is also deeply collaborating with local tech companies like Momenta and ByteDance. In 2026, it will equip nine models with advanced navigation-assisted driving systems. Over the next 12-18 months, AI-powered smart cockpits and intelligent driving functions will cover almost its entire product lineup.

Nissan and Volkswagen have even introduced new 'reverse joint venture' models.

In November 2025, Nissan Motor announced the establishment of Nissan Import & Export (Guangzhou) Co., Ltd., a 1 billion yuan joint venture between Nissan (China) and Dongfeng Motor Group. This is the first joint venture Import and export of complete vehicles (vehicle import and export) company established by a foreign automaker in China. Dongfeng Nissan will launch export operations starting in 2025, with an initial target of exporting 100,000 vehicles annually, including four new energy models under the Nissan brand.

Volkswagen is deepening localization through a new 'government-enterprise collaboration' model. In January 2026, FAW-Volkswagen Jetta Automotive Technology Co., Ltd. officially launched, pioneering a tripartite joint venture model involving 'Chinese + German + local government' partners. According to the plan, the company aims to launch five new models by 2028, four of which will be new energy vehicles. The first Chengdu-made Jetta new energy vehicle is expected to roll off the production line in September 2026.

Skoda's exit indeed reflects the survival pressure faced by some joint venture brands in the Chinese market. Against the backdrop of the strong rise of local new energy automakers like BYD, NIO, and Leapmotor, foreign brands lacking strategic depth in electrification are undergoing accelerated reshuffling.

However, this does not mean that all joint venture brands are headed for exit.

Instead, China is fostering new paradigms of joint ventures and cooperation. China's technological accumulations in electrification and intelligence are becoming new bargaining chips for joint ventures. This shift is clearly reflected in corporate strategic statements. Whether it's DPCA's 'Made by DPCA, Sold Globally' or Nissan's emphasis on 'In China, For China, To the World,' they all point to a common trend: The strategic focus of joint venture automakers is shifting from the past model of 'In China, For China' to 'Based in China, Radiating Globally.'

Skoda's exit from the Chinese market is a typical case of a traditional joint venture brand's maladaptation to China's electrification transformation wave. However, it does not represent the fate of all joint venture brands. The Chinese automotive market is transitioning from scale expansion to value competition, and joint venture brands now face not a simple 'in or out' choice but an inevitable question of 'how to transform.'

For those joint venture brands that can quickly adapt to market changes in China, deeply localize, and actively embrace electrification and intelligence, the Chinese market still offers abundant opportunities. Cases like DPCA's transformation, Mercedes-Benz's deep localization, and Nissan's reverse exports demonstrate that joint venture brands are exploring diversified paths for survival and development.

The future of the Chinese automotive market may not belong to any specific camp but will certainly go to those companies that can best adapt to change and meet consumer demands.