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back to index backASIAtalk June,  2017


Chinese-German cooperation blossoms in auto, tech

Corporate partnerships surge, seen as a response to Trump era.

Major Chinese and German companies are forming strategic partnerships in wide-ranging fields as the former seeks access to cutting-edge technologies while the latter sets sights on the enormous Chinese market.

The most symbolic of such collaborations are a tie-up between leading Chinese search engine Baidu and German automotive components supplier Robert Bosch in self-driving vehicles.

Baidu Group President and Chief Operating Officer Lu Qi and Bosch board member Dirk Hoheisel signed a cooperation agreement in Berlin on June 1. Chinese Premier Li Keqiang and German Chancellor Angela Merkel were both present at the signing, signaling the partnership's strategic importance to both countries.

Baidu and Bosch were not the only ones. Representatives from about 10 leading companies from each country inked such partnerships as Li and Merkel looked on.

Chinese automaker Anhui Jianghuai Automobile Group (JAC Motor) and Germany's Volkswagen signed a deal to make and sell electric vehicles in a 50-50 joint venture. In addition, electric-vehicle startup NIO agreed to develop electric vehicles and self-driving cars jointly with German auto parts manufacturer Continental.

Shanghai-based NIO was established in 2014 and has drawn investment from the likes of Tencent Holdings and JD.com. Baidu recently invested nearly $100 million in it. NIO plans to release its first electric vehicle as soon as late this year, and will outsource production to JAC Motor. Continental will provide tires and parts, and is also in a partnership with Baidu, NIO's largest shareholder.

The result is a framework in place in which Baidu, NIO, JAC Motor, VW, Bosch and Continental are working together to develop electric vehicles and self-driving cars in China.

Germany's Daimler, meanwhile, has agreed to broaden its partnership with Beijing Automobile Works (BAW) from luxury vehicles to alternative energy vehicles. Daimler has also decided to increase investment in an electric-vehicle venture with BYD Auto.

Corporate partnerships between China and Germany have grown since then-Premier Wen Jiabao and Merkel made several reciprocal visits in 2011 and 2012. The rapid spread of new technologies in automobiles and IT has made it imperative to bring together China's vast consumer market and Germany's technological prowess.

In an increasing number of cases, the Germans decided on tie-ups after assessing the technological abilities of the Chinese side. Of particular note is the internet of things. For instance, communication equipment supplier Huawei Technologies has partnered with Germany's DHL to make the logistics business more efficient by using the latest in communication technology to precisely track cargo. Semiconductor company TongFu Microelectronics is working to boost productivity in the manufacturing sector in partnership with German chipmaker Infineon Technologies.

Since the start of the Xi Jinping administration in 2013, major Chinese appliance manufacturers have gone after German companies, embodied by Midea Group's 2016 acquisition of German robot giant Kuka. There has been pushback in Germany, as German companies complained of difficulty acquire Chinese companies, which enjoy unfettered access to German businesses. As a result, the acquisition of a major German chipmaking equipment manufacturer by a Chinese investment fund was aborted.

Despite such difficulties, a Sino-German honeymoon is blooming, partly in reaction to protectionist U.S. President Donald Trump, who has pulled out of the Paris climate pact, citing the America-first policy. As the U.S. increasingly looks inward, the two countries are pushing more corporate tie-ups. The Chinese also are making concessions to German concerns, such as loosening foreign ownership requirements in the auto sector.

At a press conference following her June 1 summit with Li, Merkel emphasized that China will be an even more important and strategic partner in the future. The Asian nation accounted for 6% of German exports and 10% of imports in 2016, supplanting the U.S. as the European country's largest trading partner.

As a market, China accounts for more than 40% of VW's global sales volume, and German nameplates like Daimler and BMW have a high share of the luxury car market there. In many cases, Chinese sales determine a company's overall business results.

Since the outbreak of a diesel-emissions scandal, VW and other automakers have rapidly changed their eco-car strategies to focus more on electric vehicles. However, those automaker employ many workers in diesel vehicle operations in Germany, so a sudden shift to electrics would create employment problems at home.

In contrast, China has already become the world's largest market for electric cars. To German automakers, there is great benefit from accumulating experience in China before a European electric car market emerges.

Germany's government and private sector are both increasingly dependent on China as a market and as a field for refining their technologies.

Source: Nikkei Asian Review - GAI






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