Beijing is more advanced than Shanghai
German carmakers hope for a quick recovery in China
Since China has the corona virus largely under control and has barely counted local infections for a long time, the exhibition, which was initially postponed in the spring, could be rescheduled. In previous years, the annual fair, which takes place alternately in Shanghai and Beijing and is one of the largest in the automotive industry, has attracted millions of visitors. For fear of the introduction of the virus, strict restrictions on entry and two weeks of quarantine still apply in China. There are also only a few flights to China.
"I expect very good sales in the second half of the year," said Cui Dongshu from China's Passenger Car Association (CPCA) to the German Press Agency in Beijing. After the sharp slump due to the pandemic in the first half of the year, the expected decline for the entire year will decrease to a minus of only five to eight percent. Despite all the uncertainties, the expert expects an increase of eight percent in the coming year. Other experts also expect an increase of five to seven percent.
"Without China, the German auto industry would be hard to recognize," said Ferdinand Dudenhöffer from the Center for Automotive Research (CAR) in Duisburg. Mercedes suffered a global sales decline of 20 percent in the second quarter, but sales in China increased by 22 percent, the expert explained the situation. At BMW it looked "even more blatant": a global slump of 25 percent was offset by an increase of 17 percent in China in the second quarter.
"During the pandemic, China has become significantly more important for German carmakers," said Dudenhöffer. The VW group sold 40 percent of its cars worldwide this year in China. Being heavily dependent on a large region is always a risk, he said. "But the question is which risk is greater: Dependence on China or becoming a niche supplier in China?"
USA poses greater risk
China is very interested in working with Germany. According to the expert, risks could be made “manageable” and “bearable”. The US under US President Donald Trump is a much greater risk because it is unpredictable: "If Trump has a bad day and needs a few votes, he will raise tariffs on the German auto industry overnight." - brings losses.
Where the market in Europe and the USA is not doing so well, it shows "how dramatically important this market is," said Stefan Bratzel from the Center of Automotive Management (CAM). “China is more than a beacon of hope, it is an important anchor especially for German carmakers.” No manufacturer can afford to exclude this market. "But now you have to be very careful not to neglect the other markets either."
The growing dependency is not without problems. "If the market gets a problem and you are over-proportionally active there, then you can get into turbulence," said Bratzel. "A very high market share in China naturally also means a kind of dependency on a political dimension that can even be blackmailed."
Behind the turnaround in the auto business lies the economic recovery in China, which is the first major economy to show growth again. People's fear of using public transport during the pandemic is also seen as a motivating factor for buying a car. Sales of passenger cars rose 8.8 percent in August compared to the same month last year to 1.73 million, after an increase of 7.9 percent in July. Electric vehicles sold faster with an increase of 45 percent in August to 82,500.
"I see very strong growth by the end of the year," said BMW China boss Jochen Goller of the German press agency. After the decline in sales in China due to the coronavirus outbreak earlier in the year, Goller is aiming for “single-digit growth” for the year as a whole.
Regardless of all the uncertainties caused by the pandemic and the development of the global economy, he believes that growth in China will continue next year. “Our goal is always to grow faster than the premium market,” said Goller. With the growth in China, the share of the Chinese market in the Munich-based carmaker's global sales also rises to almost 30 percent.
Goller rejected warnings about too great a dependency on the world's largest car market in China: "It is not an option not to grow in China." In addition, BMW is broadly positioned in the world and also produces in the USA. For BMW, the European market is also “far larger” than that in China. "We have a good balance."
Audi plans a joint venture with FAW
Meanwhile it became known that Audi wants to strengthen its presence in the Chinese market with a new joint venture for electric vehicles. The Volkswagen subsidiary is holding talks with the Chinese car company FAW, reported the industry and business newspaper “Automobilwoche” on Saturday, citing company sources. The negotiations with the Chinese partner, with whom Audi already operates a plant in Changchun in northeast China, are already well advanced and should be completed by the end of the year.
Audi wants to hold 75 percent in the joint venture. The location of the new plant for electric vehicles is still part of the negotiations. Audi did not want to comment on the report.
According to the report, the electric vehicles created in the joint venture will be built on the PPE platform that Audi operates with Porsche. The electric series, known internally as E6 and EQ5, would be considered as the first models. The E6 sedan could make the start. It has not yet been clarified whether the plant will also manufacture e-cars from Porsche such as the electric Macan.
More:China's ruling party has set up a global network. Two Asia experts describe this system of influence - and explain why it is dangerous.
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