German Automobile Expert: Cooperation Instead of Tariffs

More than 40 exhibitors from 15 major vehicle brands around the world, representing the latest cutting-edge technologies and models, gathered at the seventh China International Import Expo (CIIE), which was held in Shanghai from November 5 to 10. Volkswagen, BMW, Mercedes-Benz and other German car companies exhibited their leading models and cutting-edge technologies, expressing their intention to continue deepening cooperation with China and promote electrification and digital transformation of products to meet the needs of Chinese consumers.

The European Commission’s tariffs on Chinese-made electric vehicles have officially come into effect recently, causing widespread controversy in the political and business circles in both China and Europe. According to Ferdinand Dudenhöffer, a well-known German automotive expert, Chinese carmakers are already ahead of their German competitors in many areas. In his opinion, the EU Commission’s new tariffs on Chinese e-cars would harm Europe rather than benefit it.

China Today (CT): What is China’s standing in the global market of electric cars?

Ferdinand Dudenhöffer: China has accumulated know-how in lithium-ion batteries over several decades. Contemporary Amperex Technology Co., Limited is now the largest battery manufacturer in the world. Since the battery accounts for up to 40 percent of the cost of an electric car, Chinese brands have a clear cost and price advantage. Europe has missed this development opportunity because we are short of a long-term vision. In the past, the heart of the battery industry was in the Republic of Korea, but now it has moved to China.

CT: So would you say competition for German companies has intensified?

Dudenhöffer: Yes of course. However, German carmakers can also benefit from China’s natural competitive advantages if they work with Chinese companies, especially in batteries. The global car market is large and offers space for both German and Chinese manufacturers. For this we need Chinese manufacturers to strengthen cooperation in the automotive sector and should not decouple from them.

CT: What are the biggest differences between Chinese and German car manufacturers at the moment?

Dudenhöffer: There are customer surveys from China that have published a really interesting conclusion. In a nutshell: Young Chinese consumers prefer to buy domestic products. For them, Porsche, BMW, Mercedes, and Audi are the cars of their parents’ generation. China’s young people want modern electric cars with smart cockpits and autonomous driving functions. And they are developed in China, for example, XPENG, NIO, Chery and others.

CT: Does that pose challenges for German carmakers?

Dudenhöffer: It certainly does. While Tesla and Chinese manufacturers such as BYD, Chery, Geely, Li Auto, NIO, Xiaomi or XPENG are increasingly establishing themselves with new technologies, the sales of German carmakers are collapsing at record speed. The value of the almost sacredly celebrated brands of the German carmakers is melting away in China.

CT: Why has this happened?

Dudenhöffer: Production processes such as gigacasting, which significantly reduce production costs, are not on the agenda of German carmakers. The Chinese counterparts, however, are intensifying their research and applications. In the case of “software-defined cars,” China’s tech giants, such as Huawei, Baidu and Tencent, are working closely with the domestic automotive industry, thus taking automobiles to a new level as a result. In China, there is excellent digital infrastructure that is suitable for developing the car of the future, while in Germany efforts are being made to plug dead spots. We are increasingly cornered by the huge cost disadvantages and the slowness of Germany as a business location.

CT: Does this mean there will be a change of course for German carmakers?

Dudenhöffer: Yes, and fast. The coming quarters will hardly differ from the current poor results. A realignment also has a lot to do with learning from Tesla and China. To learn that, you can’t stay in Germany, you have to go to China to learn about vehicle development.

CT: Late October, the European Commission decided to levy five-year anti-subsidy tariffs on Chinese electric vehicles. What do you think of that? 

Dudenhöffer: Like many other voices in the automotive industry, I also say tariffs are a catastrophe! By passing tariffs, the European Commission will harm Germany, the German car industry, and our good cooperation with Chinese companies. The tariffs themselves hardly appear fact-driven. They seem highly arbitrary, more like a political action. Now that Donald Trump has won the presidential election in the U.S., Germany needs a good relationship with China because Trump might put pressure on Germany and the German car industry after he takes office. The European Commission is therefore acting against Germany with its tariffs. If you ask me, it’s a shame. The commission’s action is harming its own industry.

CT: What are the consequences of the additional tariffs on China’s electric cars?

Dudenhöffer: Additional tariffs artificially increase prices for electric cars from China, which means that fewer people will buy electric cars and climate change will not be slowed down. At the same time, opportunities for the development of battery in Europe are being destroyed as the market for electric cars loses momentum. If no electric cars are sold, there is no need for battery factories, which are subsidized with billions of euros from Brussels and taxes from citizens.

In addition, our carmakers are currently having a hard time selling their electric models in China. We would definitely have a chance if we sold more electric cars in our home market Germany, and then the demand for electric cars from Germany would increase significantly. But our automotive industry does not have the scaling advantages to be competitive. As a result, the tariffs will not only have a short-term negative effect, but also destroy the future of the German car industry.