Opinion
BMW, Mercedes and VW are fighting a losing battle in China. And perhaps they now understand: Xi Jinping wants it that way.
BMW reports a slump in sales in China. VW is negotiating the closure of a plant in China. And Mercedes is cutting its profit forecast – because of China. The negative China news from German car companies that has been released in the last week alone is adding up to an increasingly dramatic picture. German manufacturers are clearly fighting a losing battle in Xi Jinping’s empire. Their market shares are falling dramatically, the nice profits of the past few years are evaporating. And because China has become the companies’ most important market, their entire profit and loss accounts are now out of balance.
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There are many explanations for what we are currently experiencing: incorrect model policy, excessive costs, competitive pressure from Chinese manufacturers such as BYD. But one important reason rarely comes up: German car manufacturers are no longer needed in China. Xi Jinping and the ruling Communist Party want their market share to continue to fall. This is the only way at least some of the 40 domestic car manufacturers can survive. The majority of them are not even ten years old – the result of a state investment policy that has gotten completely out of control. Many of the Chinese manufacturers are actually bankrupt, but are staying on the market thanks to state loans. And are now ousting foreign competition with price reductions of up to 50 percent.
China has always only cared about itself
A look back into the past helps to understand the present. From the very beginning, China was only concerned with the development of its own car industry. That is why the Chinese leadership brought VW into the country as the first manufacturer in the early 1980s – and forced it into a joint venture with a completely outdated industrial group.
This was the recurring pattern for many decades: foreign companies were only allowed to invest if they agreed to such partnership models and delivered more and more technology over the years. In the end, the companies, especially the German car manufacturers, even had to operate development centers in China. And the Chinese Communist Party ensured that its own companies learned quickly. Hundreds of top Chinese managers moved from foreign companies to domestic manufacturers.
Nothing can reverse this development. Mercedes, VW and BMW really only have the task of managing their own decline in China as sensibly as possible. They cannot expect their market share to increase again in the long term. They will be lucky if they can hold on to the niches of the Chinese market – especially in the top segment. But they will no longer be successful as mass manufacturers. The companies are not yet really facing this bitter truth. But one can assume that one realization will gradually sink in: China is not a normal market as long as Xi Jinping’s regime determines the fortunes of all industries.
Source: Stern
