News Analysis: German car industry benefits from cooperation with China

China has become the most important single market for Germany's automotive industry. Even amidst headwinds from the global COVID-19 pandemic, there is no end to this development as recent figures of Germany's top three car manufacturers BMW, Daimler and Volkswagen show.

While most global markets declined in 2020, car sales of BMW and Daimler in China increased by 7.4 percent and 11.7 percent respectively, both marking historic sales records during the crisis-ridden year.

China was a "driving force in innovation," a press spokesperson of BMW told Xinhua. Numerous innovations for the Munich-based car manufacturer would be developed in China before migrating to other markets. With the exception of BMW's facilities in Germany, China was home to the largest research and development capabilities of the company.

Germany's largest carmaker Volkswagen saw an overall decline of 15.2 percent in vehicle sales in 2020. As China recovered more quickly from the pandemic than other countries, sales in Volkswagen's biggest market only decreased by 9.1 percent.

The Chinese market remained an "important pillar" for Volkswagen as the group would be "cautiously optimistic that the market potential will continue to further develop" in 2021, Leslie Bothge, Director CEO Communications at Volkswagen Group China, told Xinhua in a recent interview.

Having achieved a market share of 19 percent, with four out of ten cars sold in China, Volkswagen is even planning to further expand its market share in the country in 2021 and is expecting "positive growth in deliveries above the overall market," added Bothge.

The fact that German car manufacturers increasingly rely on the Chinese market to boost their car sales does not come as a surprise. Over the last years, the growth in car sales of German carmakers in China has been continuously surpassing that of other markets.

Last year, China accounted for 38 percent of global car sales of Germany's largest car manufacturers Volkswagen, BMW and Daimler, according to a study conducted by the German Center for Automotive Research (CAR).

Following the example of the Regional Comprehensive Economic Partnership (RCEP), which was signed in late 2020 and created the world's largest free trade area, a trade deal between China and Germany in the automotive sector could be a "win-win game" for both parties, German automotive expert Ferdinand Dudenhoeffer told Xinhua.

It would be ideal to reconcile such a trade deal with the politics of the European Union (EU), said Dudenhoeffer, as it could be "tremendously important" for the future of Germany's manufacturing sector.

The deal would not only involve economic aspects but also political and social ones, such as a "CO2-free future" through shared resources and technologies, according to the expert.

An economic and research-oriented partnership between the two countries, in particular in Germany's automotive flagship industry, could therefore be "highly influential for the future," added Dudenhoeffer.

In addition, such partnership could complement agreements already made, such as the investment agreement between the EU and China that concluded negotiations at the end of 2020.

Direct investments from China to the EU have totaled about 120 billion euros (144.29 billion U.S. dollars) while the EU has invested 140 billion euros over the last 20 years. Although this was a "large amount," there is still potential for growth, according to the German government.

The fact that China agreed to remove and phase out joint-venture requirements in the automotive sector and committed to market access for alternatively powered vehicles in the scope of the recent investment agreement will be of particular interest to German car manufacturers.

German carmakers are heavily invested in joint ventures with Chinese companies, such as Daimler with BAIC, BMW with BBA and Volkswagen with SAIC, only to name a few. In addition, China is one of the largest markets for new energy vehicles and thus instrumental for the success of Germany's car industry.