Serving the World's Largest Emerging Automobile Market
Home > EDITORIAL > Five takeaways from five Sino-German auto deals during Premier Li’s official state visit

Five takeaways from five Sino-German auto deals during Premier Li’s official state visit

During Premier Li Keqiang’s official state visit to Germany in early June, five major deals involving Chinese and German automotive OEMs, suppliers and tech companies in the area of EVs and smart mobility were signed.

On May 31, Continental signed an agreement with China’s smart EV startup to collaborate on EVs, intelligent transportation systems and automated driving, as well as an agreement with Chinese online search giant Baidu to collaborate in the areas of automated driving, connected vehicles and intelligent mobility services.

A day later, Baidu and Bosch signed an agreement on joint development of smart mobility where Bosch will be involved in Baidu’s “Apollo” project which seeks to provide an open, complete and reliable software platform for its partners in the automotive and autonomous driving industry to develop their own autonomous driving systems. Then JAC and Volkswagen inked their 50:50 JV agreement to produce EVs under a new brand, making Volkswagen the first foreign carmaker in China to have three vehicle JVs. Daimler and BAIC Group signed a framework agreement where Daimler intends to take minority stake in BAIC’s NEV subsidiary BJEV.

What do these deals mean for the industry?

First, the five agreements have long-term implications for both China’s Made-in-China 2025 and Germany’s Industry 4.0 and therefore not only reflect the interests of Chinese and German companies, but also the strategic interests of the two countries (e.g. deals sometimes are tailored);

Second, Continental’s agreements with NIO and Baidu as well as Bosch’s agreement with Baidu again show that in the smart mobility game, you can’t do it alone. It’s a game of coopetition where foes are often partners and both the traditional and new players will have key roles to play;

Third, the establishment of the JAC-Volkswagen JV basically breaks the industry policy requirement that a foreign automaker can only have at most two JVs of the same vehicle type, and gives Volkswagen a “shortcut” in the NEV game: it simply does not have much to offer in its China NEV pipeline but fortunately JAC does (and the fact that it was approved in just nine months since the MOU signing has much to do with the deal being “tailored”);

Fourth, Daimler’s intent to take a minority share in BJEV is yet another unorthodox move by the German carmaker that is already a 10 percent stakeholder in the public-listed BAIC Motor, and is a move to strengthen its NEV efforts in China, which have not had too much success with the Denza brand from the BYD-Daimler JV. It also gives Daimler a third investment in or with a Chinese OEM;

Finally, and most importantly, the two moves by Volkswagen and Daimler now give the two German automakers leverage to meet Chinse government’s stringent NEV credit scheme that is expected to go into effect next year requiring NEV credits to account for 8 percent of total sales. They simply cannot get to that target purely on their own.

The five deals simply show how close the level of cooperation between Chinese and German automotive companies are as well as the level of economic and political ties of the two countries.

| | | | | | | | | | | | | | |

Leave a Reply