The German automotive industry has long benefited from China’s booming automotive market. European car manufacturers are now investing record sums in order to catch up with Chinese companies.
European investments in the Chinese automotive sector have reached a new record. As the “Financial Times” reports, European direct investments in the Chinese automotive sector amounted to 6.2 billion euros in 2022. For comparison: EUR 1.5 billion was invested in all other sectors combined. This emerges from data from the US research group Rhodium.
In 2018, total investment in the automotive industry was €1.7 billion, compared to €5.5 billion in other sectors. Last year’s surge also reflects in part BMW’s increased stake in its Chinese joint venture.
The battle for market share
Despite the tense relations between Western countries and China, the upswing in the automotive sector shows that European investors appear to be still strongly represented there. In the first quarter of 2023, capital market deals in China’s auto sector, including foreign companies such as US firms, totaled US$9.6 billion, according to data from Dealogic. These deals include mergers and acquisitions, equity investments, and pending deals.
According to the Financial Times, analysts warn that these spending are no guarantee that traditional automakers such as Volkswagen, Ford, General Motors and Toyota can regain lost market share. Chinese companies have an advantage over foreign competitors through government subsidies and vertically integrated supply chains.
Breaking off relationships “unthinkable”?
In March, the President of the European Commission, Ursula von der Leyen, announced a tougher approach to China as part of a “de-risking” strategy and promised stricter restrictions on trade in sensitive technologies.
Regardless of this, Mercedes boss Ola Källenius recently told the “Bild am Sonntag” that breaking off relations with China “would be unthinkable for almost all branches of industry in Germany”, quoted the “Financial Times”.
Fewer foreign brand car sales
Five years ago, almost two-thirds of all car sales in China were still dominated by German, Japanese and US brands. But now their share has fallen to about half, as the “Financial Times” reports. According to data from Automobility, eight of the top 10 best-selling electric models in China this year are from Chinese brands. Among them is the market leader BYD, which achieved sales growth of almost 80 percent in the first quarter of this year compared to the same period last year.
The Rhodium data does not capture U.S. foreign direct investment, Volkswagen’s €2.4 billion investment in Chinese software firm Horizon Robotics announced in October, and the German automaker’s €1 billion plan announced in April for a innovation center in China.