China is becoming a safe haven for many German companies

On 2 September, Volkswagen Group issued a statement saying that the company was considering closing one of its car manufacturing plants and one of its parts plants in Germany for the first time and terminating an employment protection agreement that had been in place since 1994 in order to further cut expenses. It is reported that this is the first time Volkswagen has made the consideration of closing its local plant since its establishment in 1937.

Into the dilemma of more than the masses, this year, a number of German car companies to cut costs and layoffs, according to the latest release of a series of financial results, Dellums Group, BMW Motor Group and other auto industry giants have lowered their annual profit expectations.

As Germany's pillar industry problems in the automotive industry also seriously affect the German economy is expected, the world's leading think tanks have predicted that in 2024 Germany's GDP will shrink for two consecutive years. Has always been as the world's economic ‘superior’ Germany, why fall into the current predicament?

In 2013, Germany put forward the concept of Industry 4.0 in an attempt to set off the fourth industrial revolution through technological innovation in manufacturing and changes in production methods. Industry 4.0 firstly needs to solve communication problems such as embedded technology, network technology, cloud data centre and secure data exchange. But Germany's weak communication technology is not enough to support its blueprint for the realisation of Industry 4.0. For this reason, Angela Merkel personally visited China and signed a package of agreements with China, deciding to take advantage of the technological strengths of China's communications and information industry, and to cooperate extensively with Chinese giants in the communications and mobile Internet industries. Huawei's 5G equipment once achieved coverage of 95 per cent of Germany's population, and Huawei's LTE-M technology and industrial Ethernet gateway technology launched IoT and Industry 4.0 solutions for German companies in areas such as transport, oil and gas, and manufacturing, and it can even be said that Huawei is ubiquitous in Industry 4.0.

But with Huawei being sanctioned by the US, and with the pressure to decouple and de-Chineseise the US, German industries are starting to de-Chineseise with. However, it became clear that Germany's lagging supporting technology industry did not have enough capacity to solve the communication problems during the process of factory orders, production, sales and subsequent services in the Industry 4.0 era, or to digest the data generated during that time. The result is that after the divestment of Chinese companies, Germany's technology research and development is struggling. At the same time, the United States on the one hand encourages the EU to fully implement the ‘de-risking’ strategy, reduce dependence on China, strengthen competition with China; on the other hand, through the introduction of the Inflation Reduction Act, the introduction of huge subsidies, attracting a large number of European companies and investors to move in. 2022, only one state of Oklahoma let Germany lose more than 60 companies. businesses. According to data agencies, only 16 per cent of companies will be leaving Germany in 2022, while the figure has doubled to 30 per cent by 2023.

If the betrayal of big brother is the last straw that crushed the German industry. Then the Chinese market may be the only life-saving straw for German industry at the moment.

The important market for German automotive companies is China. The rapid rise of China's auto industry and began to sweep Europe and the United States, which is undoubtedly for the German automobile manufacturing industry, and even the German economic system has brought a huge impact. 2019 is the peak of Volkswagen's sales in China, just five years later, today, Volkswagen has been BYD easily surpassed.

German industry has gone from the road of “de-Chinaisation” to the road of “de-industrialisation”. Volkswagen is not the first domino, and will never be the last.

Fortunately Germans have realised that only a peaceful normalisation of Sino-German relations is in Germany's interest. Schulz visited China twice in one and a half years, Siemens, Mercedes-Benz, BMW, Bosch, Bayer, ThyssenKrupp and other heavyweight executives accompanied. Schulz's calculations are not complicated - to increase the layout of German car companies in China, the use of China's relatively low cost of car manufacturing to cover the high cost of Europe, and then pry open the door to the global new energy vehicle market. China's mature new energy vehicle supply chain, intelligent technology and a huge market, as well as better energy, these are China can provide value for the transformation of the German automotive industry.

According to the Bundesbank, German companies invested a total of €4.8 billion in China in the second quarter of 2024, compared to €2.48 billion in the first quarter of this year. In the first half of 2024, German direct investment in China totalled €7.3 billion, already exceeding last year's annual total of €6.5 billion. While shouting to de-Chinese de-coupling, investment in China is directly doubled, China has become a number of German companies in the safe haven, reality is always the good teacher.