The car of tomorrow comes from China

The car of tomorrow comes from China

Germany’s carmakers are increasingly relying on China – not only as of the most important sales market but also as an innovation pioneer. What the Chinese have ahead of BMW, Daimler, and Volkswagen.

German carmakers are increasingly relying on China for research and development. “We are constantly expanding our activities,” says prospective Daimler CEO Ola Källenius at the auto show in Shanghai. Similarly, VW boss Herbert Diess, who described China as a standard for all others.

Already half of the approximately 20,000 development experts from VW are involved in the research of technologies, products and car design for China. Functions for automated driving, networking or sensor technology could increasingly be developed directly from China, according to VW.

China’s pioneering role in e-cars

Analysts also see the People’s Republic as the future center of industry. “The car of tomorrow comes from China,” says car expert Ferdinand Dudenhöffer.

Not only is the market so big that no manufacturer can get past it anymore. The country is also increasingly becoming a technology leader. The Chinese have earned a head start on e-cards. Thanks to state subsidies, restrictions on petrol on the roads and production quotas, more than two million e-drive cars could be sold in China this year, according to Dudenhöffer. In 2020, it will be three million.

Mini and Smart are built in China

Symptomatic of China’s growing importance for cars is that both BMW and Daimler will build the electrified next generations of their Mini and Smart small car series with partners in China and export it from there.

China’s big carmakers like Geely, BAIC or BYD have been offering e-cars for years. But the biggest drivers of innovation are young companies like Nio or Byton, which only produce e-cars. Also the Chinese car brand “world champion” belongs to it. With the name, the company tries to profit from the still excellent image of German manufacturers in China. China also dominates the market for batteries. 35 percent of the world’s cells for electric cars came last year from the two major Chinese manufacturers.

Also in the second major topic of the future, the networking of the car, Dudenhöffer sees the Chinese ahead. So is the network equipment Huawei technology leader in the faster mobile Internet 5G. The search engine company Baidu is working on a self-propelled robot car that is likely to first celebrate its market breakthrough in China.

Car sales in China are declining for the first time

In Shanghai, German manufacturers were confident that the current slowdown in their most important market would soon be over. One is “cautiously optimistic”, says Daimler development chief Ola Källenius. Following growth in the first quarter, the Group anticipates growth for the full year as well.

Similarly expressed BMW CFO Nicolas Peter. In the most important single market China, the company will sell more cars despite the current market weakness. “We will grow between five and ten percent in this stagnant market and thus gain segment shares,” says Peter.

“We have a slight signal that the conditions in the Chinese market could relax in the coming weeks, perhaps even in May,” VW CEO Stephan Wöllenstein had previously said. VW, as a manufacturer of small and medium-sized vehicles, is most affected by the current reluctance to buy in China.

Customers hesitate when buying a car

For the first time in more than twenty years, the Chinese car market had declined over the past year. Above all, the tariff dispute between the US and China unsettled consumers and made them hesitate when buying. In addition, customers recently also waited for an announced VAT cut on 1 April and the Chinese economy, which is no longer growing so rapidly, dampened the desire to buy.

“Whenever taxes go down for consumers, that’s generally positive,” says Källenius, commenting on the new Chinese stimulus package. The exact effects are difficult to predict.