GT Voice: China remains vital for German firms despite rising competition
Published: Apr 07, 2024 10:19 PM
Illustration: Liu Xiangya/Global Times

Illustration: Liu Xiangya/Global Times

Some Western media outlets are keen to hype the competition faced by Volkswagen in the China market, but this is not the whole story. The German carmaker remains by far a giant in China's car market. This offers a new perspective on competition from Chinese automotive brands, and companies in the broader manufacturing sectors.

It should be noted that pressure is unavoidable in any country. Given the intense competition for limited market space, business activities are constantly accompanied by arduous efforts. Citing Volkswagen Group CEO Oliver Blume's interview with German newspaper FAZ, Reuters reported on Friday that Volkswagen wants to avoid setting "utopian" goals for its market share in China. So, anything above 10 percent was "very respectable" given the intense competition.

The tone reflects the anxiety of the West over the increasing competition in the manufacturing sector. However, more importantly, it is hoped people can see from Blume's words the rational attitude and unremitting efforts of Volkswagen in maintaining its market share in China, which reflects the importance of the fast-growing China market for the German carmaker.

According to data compiled by Bloomberg, BYD leapfrogged Volkswagen as China's bestselling car brand for the first time in the first quarter of 2023. Previously, Volkswagen had been reportedly the bestselling brand among automakers in China since at least 2008, when data from the China Automotive Technology and Research Center became available. Although Volkswagen faces fierce competition from local brands in China, it would not change the fact that Volkswagen still enjoys high brand awareness among Chinese consumers, while China is also an important market for the German carmaker.

In the late 1970s, China's auto manufacturing industry was weak, but auto consumption had begun to increase. Against this backdrop, China constantly opened up its market and encouraged multinational enterprises, including Volkswagen, to invest in the country. In the following decades, Volkswagen's sales in China grew rapidly.

When the global financial crisis of 2007-09 hit, followed by the European sovereign debt crisis of 2010-12, the consumption of automobiles in the US and Europe was negatively affected. 

The China market provides tremendous opportunities for Volkswagen and holds an important position in Volkswagen's global strategy, laying the solid foundation for its performance in the global market. According to Reuters, Volkswagen said in February that group deliveries rose 13.3 percent in January to 698,200 vehicles, with China the leading growth region.

In recent years, China's manufacturing industry, especially electric vehicle manufacturing, has developed rapidly, but China's commitment to high-level opening-up has remained unchanged. Foreign investment is welcome and the door to China will only open further. 

However, in the US and Europe, trade protectionism is on the rise. Some Westerners are trying hard to contain China's manufacturing rise and smear China's economy. They amplify the competition faced by Western companies in China while deliberately overlooking the opportunities offered by the Chinese economy. 

According to Western media reports, German Chancellor Olaf Scholz will visit China in mid-April. It's not at all surprising that some Western media outlets have tried to hype the competition faced by Volkswagen ahead of Scholz's reported visit. However, a closer look at Volkswagen's performance in the China market shows that the opportunities outweigh competition. Despite fierce competition, China is still a key market for Volkswagen.

The German government in July 2023 presented a strategy for relations with China that pointed to a need to reduce the risks of economic dependency. This proves that there are more than a few political elites in Germany who are trying to push for "de-risking" from China.

However, this is not the whole picture of public opinion. According to media reports, Germany's top corporate brass will join Scholz when he visits China later this month, showing that German companies attach great importance to economic and trade cooperation with China. It is hoped Scholz's reported visit can elevate China-Germany economic relations to new heights and enhance mutual understanding.