Mercedes CEO Says Brand Sticking With China for the Long Haul

Mercedes-Benz CEO Ola Kallenius has told the German media that the brand has no intention of cutting ties with China, saying such a move would be unwise for the whole of Germany industry. 

"The major players in the global economy, Europe, the U.S. and China, are so closely intertwined that decoupling from China makes no sense," he was quoted as saying in Bild am Sonntag.

With the global situation looking increasingly hectic and economies in varying degrees of disarray, there are a lot of questions about the future landscape of business. Like many Western nations, Germany cut ties with Russia when war broke out in Ukraine. However, the Russian government has reportedly been getting closer to China — which has a vested interest in becoming the dominant regional superpower. Meanwhile, the United States would like to maintain global supremacy and sees both nations as a mounting threat. 

This puts Germany in a difficult position, especially automotive manufacturers. Volkswagen is one of the most popular brands sold within the region by far and Mercedes-Benz moves substantially more product in Asia than the United States. Both markets remain extremely important, though China seems to be the one poised for the most growth in the years to come. 

U.S. brands like General Motors also have a lot riding on relations remaining copesthetic with China. However, America seems increasingly interested in distancing itself from the nation while Germany has grown more reliant on the Chinese market. This has resulted in a lot of speculation and encouraged industry leadership to weigh in on the matter, as noted by Automotive News: 

German automakers depend on the Chinese car market, the world's largest, and Mercedes counts China's Beijing Automotive Group and Geely Chairman Li Shufu as its two top shareholders.

China accounted for 18 percent of revenues and 37 percent of car sales at Mercedes in 2022 and Kallenius predicted more to come.

"Our sales figures in China are increasing and I am quite optimistic that we will also grow this year. During the corona years, the wealthier Chinese in particular made extraordinary savings," Kallenius said. "This purchasing power should benefit us."

That presumes there are no new global conflicts between nations, not that this would be the first time Germany has found itself going against the grain in Europe. 

Though it also fails to take into account that Chinese automakers all want to be come global brands and already dominate a few segments other automakers (including Mercedes) doesn't really bother with. For example, small EVs are the norm in Central Asia. But German automakers tend to focus on upmarket luxury models, with the only overlap being on customer data harvesting.

"In China, electromobility has so far developed via inexpensive small cars and city cars," said Kallenius. "Well over 90 percent of sales are achieved with e-cars that cost less than 40,000 euros. We don't even compete in that segment."

While China has shown an extraordinary enthusiasm for foreign capital, it has likewise launched the Shanghai Cooperation Organization (SCO). The security bloc incorporates China, India, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Saudi Arabia, Tajikistan and Uzbekistan. Often presented as a trade organization, it’s effectively a stop gap for U.S. influence. 

Fingers are likely being crossed that relations stabilize and none of the involved parties decide to flex their muscles any more than they already have. But history is notoriously hard to predict in advance and is loaded with unsavory moments. Germany may find itself in an extremely undesirable position should the situation worsen and is going to hedge its bets wherever possible.

"We are not naive. Of course we see the political differences and tensions," Mercedes' top dog stated. "The Corona period has shown how fragile the supply chains are. We have to become more resilient here and more independent of individual countries, for example when it comes to lithium batteries."

[Image: pisaphotography/Shutterstock]

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