50 years of diplomacy

    China: Partner and competitor in the automotive industry

    Germany and China celebrate 50 years of diplomatic relations. Cars and vehicle parts “made in Germany” also have a long history of success in the People’s Republic.

    Germany and China celebrate 50 years of diplomatic relations. Cars and vehicle parts “made in Germany” also have a long history of success in the People’s Republic.

    Germany and the People’s Republic of China commenced diplomatic relations on October 11, 1972, when Federal Foreign Minister Walter Scheel and Chinese Foreign Minister Ji Pengfei signed the joint communiqué on the commencement of diplomatic relations in Beijing.

    This partnership between the two countries has intensified and expanded over the past 50 years. There are currently over 5000 German companies in China, creating around one million jobs in the country. German automotive manufacturers and suppliers have 350 locations in China, making China the foreign country where Germany is represented most heavily.

    • One out of every three cars produced by German corporations worldwide is sold in China. In 2021, 270,000 cars were exported from Germany to China.
    • With a volume of nearly 30.1 billion euros, China is the most important destination for automotive products from German manufacturers and suppliers.
    • In no other country worldwide does the German automotive industry produce more cars, with 4.3 million units produced in 2021.
    • Many raw materials that the German automotive industry requires for the transition to electro-mobility come from China.
    • China is responsible for over 50% of Germany’s magnesium imports. 34% of rare soil types come from China, and 90% undergo advanced processing in China.

    Source: VDA, Fourin, Statistisches Bundesamt, Bundesbank, IfW

    China’s importance as a sales market has spiked in recent decades. Now, almost every third car worldwide is sold in China. In light of a growing middle class, increasing demand for mobility, and lower car density, China still has potential for growth.

    The German automotive industry was also involved in past growth. Now, about one out of every five new cars in China bears the logo of a German brand. In absolute figures: German manufacturers sold around 4.3 million cars in China in 2021.

    China is also the most important recipient of German exports for suppliers. Trade in vehicles and vehicle parts makes up the largest segment of German visible exports to China. Overall, Germany has a clear trade surplus in the trade of automotive goods (27 billion euros).

    This illustrates the importance of the Chinese market for the German automotive industry. Business with China also creates a large number of jobs here in Germany. However, the People’s Republic is not just a commercial partner, but also a nation that vigorously pursues its own interests and those of its companies.

    China has become home to competitors that must not be underestimated, and the country’s importance in the setting of standards and in the technology race has grown. The German and European economies use resources, products, and technology from China required for the energy transition and which cannot be easily obtained from other sources.

    • 1984: First German-Chinese cooperation project with a German manufacturer is approved. Both parties each bear 50 percent of this joint venture.
    • 1985: China only produces a total of 5,200 cars.
    • 1985: Despite import duty of 260% on foreign cars, imports increase sharply. China attempts to increase local production – both with the existing joint venture car production agreements as well as through new investors – and temporarily prohibits the import of foreign cars.
    • 1992: China’s annual automotive production capacity exceeds one million units for the first time.
    • 2000: China produces two million vehicles.
    • 2001: With China’s accession to the World Trade Organization (WTO), the country is obligated to reduce customs duties and not apply any minimum requirements to the proportion of local net product. As a result of this market opening, the industry and market expand rapidly.
    • 2002 - 2007: China’s automotive market grows by an average of 21% year-over-year; in other words, by one million vehicles.
    • 2008: Most of the increase in global car production after the worldwide financial crises in 2008 was in China.
    • 2021: Almost one out of every three cars worldwide is sold in China.

    How to work with a country that is both partner and competitor? The VDA is aware of the challenges and issues in relations with China, while at the same time focusing on constructive cooperation. Yet one thing is clear: We need the domestic industry to remain competitive.

    Just as China would like to expand its independence from third parties with its dual circulation economy, Germany and the EU are working on strengthening their own resilience, diversifying supply chains, and reinforcing their internal locations.

    Auto Shanghai in 2019: Angela Mans (2nd from right) with the Chinese team at the joint German-Chinese booth.

    The German automotive industry supports adherence to human rights obligations, including in Chinese production facilities, and has defined high standards in this regard, such as with the Social Assessments of the Responsible Supply Chain Initiative (RSCI). Our companies‘ presence greatly aids in improving conditions for the people on site.

    The quality management center of the VDA is active in China, and abides by German standards through training, certification of production processes, and data security in all areas of the industry. Roundtable discussions organized by the VDA also convene representatives from both countries in one location. This not only promotes the exchange of knowledge, but also constructive discussion that aids in mutual economic and political relations.

    We support peaceful conflict resolution with regard to Taiwan, an important semiconductor supplier. Escalation absolutely must be prevented. Germany’s and Europe’s regulation-based cooperation with China is crucial, be it for achieving global climate goals, a peaceful and global world, or a flourishing economy. The VDA is committed to peaceful coexistence, international cooperation, and fairness in trade and investments.

    The VDA has an office in China and represents the interests of German manufacturers and suppliers on site. In so doing, the team works closely with many important institutions, including the German Embassy, the German and European Chamber of Commerce Abroad, and many other stakeholders.

    The VDA supports a wide range of cooperation projects with Chinese partners that benefit all parties involved. Some of these projects include:

    • German-Chinese Joint Declaration for a Strategic Partnership on the Electric Vehicle (2011)
    • Global Project of Quality Infrastructures (GPQI), initiiert vom BMWK
    • VDA-CATARC Sub Working Group under German-Chinese Standardization Cooperation Committee (DCKN)
    • German-Chinese Joint Declaration of Intent on the Cooperation in the Field of Automated and Connected Driving (ACD) (or Intelligent and Connective Vehicle (ICV)), 2018
    • VDA-CAAM (China Association of Automobile Manufacturers) Cooperation Projects
    • VDA-CATARC (China Automotive Technology & Research Center) Cooperation Projects
    • VDA-CAICT (China Academy of Information and Communication Technology), 2018 
    Division Foreign Trade & Customs

    Angela Mans