The boss of German carmaker Mercedes-Benz is bracing his company for a “Darwinian battle” as Europe’s auto giants reel from falling demand and the onslaught of Chinese competitors.

Mercedes-Benz CEO Ola Källenius said the biggest challenge facing automakers was halting a crisis of confidence among Chinese consumers.

European automakers have made a significant push into the EV-hungry Chinese market while responding to an unexpected slowdown in the technology’s uptake in Europe.

However, a similar demand glut in China and the emergence of cheap competitors from the region has left Europe’s carmakers fighting fires at home and overseas. For Mercedes-Benz’s Källenius, it has left them in a pivotal moment of sink or swim.

“You must control your nerves, keep investing, keep innovating, and ensure that at the end of that Darwinian battle, you are one of the combatants that are left,” Källenius said, as Reuters reported, at the Global Dialogue conference in Berlin.

Like other European automakers, Mercedes has faced struggles in the past year. The car market has been rocked by flat growth in the EV sector, rising competition from Chinese firms, and falling consumer sentiment in China. Mercedes shares have fallen more than 10% through 2024.

However, the group has outperformed German competitors Volkswagen and BMW this year, helping it become the largest German automaker by market value.

Volkswagen is fighting a mammoth battle with its works council to reduce headcount as it targets €10 billion in cost savings. In September, the carmaker issued its second profit warning in three months.

Meanwhile, BMW cut its 2024 outlook in August owing to a braking system issue and its own struggles with “muted demand” in China.

Mercedes-Benz rolled back its ambitious pledge to go fully electric by 2030 earlier this year and filed its own profit warning in July.

Some European carmakers have reacted with despair to tariffs imposed on Chinese-made EVs, after hedging their bets in partnerships with Chinese companies. However, Mercedes-Benz’s Källenius is now looking to the next stage of the automaking revolution.

Källenius’s sentiment is one shared by the boss of Mercedes’s Formula 1 setup, Toto Wolff.

Speaking to Fortune, Mercedes-AMG Petronas CEO Wolff said he welcomed the possibility of Chinese automakers joining F1.

Automakers use their presence in racing to build cutting-edge technology that will one day go into manufacturers’ consumer cars, something Wolff thinks makes Chinese automakers’ arrival imminent.

“I think it is a matter of time that Chinese brands are going to discover the innovative nature of F1, and the benefit it can bring for road cars and the massive marketing power that it [has].

“Chinese brands are technically advanced, and they offer a lot of value,” he added. “But a Mercedes is a Mercedes. It’s high-tech and luxury. And a statement of success. That’s why they can live next to each other.”

This story was originally featured on Fortune.com