German carmakers increase China presence despite tariff risk

By Shen Weiduo Source:Global Times Published: 2018/10/11 22:48:42

Expansion may offer opportunity to grab market share from US rivals

Employees look at a BMW car at an auto show in Shanghai on September 28. Photo: VCG

German automakers have been increasing their footprints in China despite the escalating trade war with the US, which experts said reflects China's efforts to improve the foreign investment climate and promote the electric vehicle (EV) market.

According to a statement BMW Group sent to the Global Times on Thursday, the group will invest more than 3 billion euros ($3.46 billion) in a new automotive plant and existing plant structures in Shenyang, capital of Northeast China's Liaoning Province, in the coming years.

The German automaker also intends to increase its stake in BMW Brilliance Automotive (BBA), BMW's Chinese joint venture, from 50 percent to 75 percent, and both partners signed an agreement on Thursday, read the statement, indicating the company is targeting long-term development in China.

BMW Chief Executive Harald Kruger said that the company has prioritized its Chinese strategy. He stressed that China is not only a huge market but also a world-level production base, and the automaker will export its models produced in China, according to a statement on the Chinese government's official website.

BMW's China expansion comes as trade tensions between China and the US are escalating, which some analysts and media reports said might threaten China's status as a production base. Some predicted that many manufacturers, including German carmakers, would shift production lines out of China to avoid risks.

Wang Jun, deputy director of the Department of Information at the China Center for International Economic Exchanges, said that it's understandable that some foreign companies, which came to China for cheap labor, might send some production lines to Southeast Asia now since tariffs might increase their operating cost.

But many of these factories are low-end, and their departures could make space for more advanced manufacturing, which could also be an opportunity for China to upgrade and transform its industry structure, Wang told the Global Times on Thursday.

"However, given German car manufacturers' high market shares in China, as well as the attractive development prospects of the huge EV market and policy dividends in the sector, they will not quit the Chinese market just due to tariff concerns. It's easy to weigh the trade-off," Zhao Junjie, a research fellow at the Chinese Academy of Social Sciences Institute of European Studies in Beijing, told the Global Times on Thursday.

According to a Bloomberg report, China will lead the transition in electric vehicles (EVs). Sales of EVs in China are estimated to account for almost 50 percent of the global EV market in 2025 and 39 percent in 2030.

China announced it would end foreign ownership limits for special vehicles and new-energy vehicle manufacturing starting on July 28 this year. Limits on general passenger car manufacturing will be lifted by 2022. It also vowed to roll out more measures to create a better environment for foreign investment.

Eying the big market, another German carmaker - Audi AG - also boosted its presence in China by strengthening its cooperation with telecommunications equipment provider Huawei Technologies Co in the intelligent connected vehicle sector, Huawei said in a statement.

Audi wants to be involved in the formulation of laws and regulations for autonomous driving in China, Saad Metz, head of the R&D division at Audi China, told a press conference in Shanghai on Thursday.

"Given the China-US trade tensions, cooperation between the US and China in the auto industry might be hindered to some extent, but it might be a good opportunity for German automakers to grab more market share from their US counterparts in the coming EV era," Wang said.

Newspaper headline: German carmakers increase China presence


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