Will China Buy German Car Factories Facing Closure to Avoid EU Tariffs on EVs?
News from the automotive industry hints at potential changes on the horizon as Chinese officials and automakers cast their eyes on German factories slated for closure. Among the sites under consideration are Volkswagen’s factories, with Chinese stakeholders expressing particular interest. This move could enhance China’s influence in Germany’s prestigious auto industry, renowned for its historic and luxurious car brands.
The German automotive sector represents a significant opportunity for Chinese companies, which have invested across numerous industries within Europe’s largest economy—ranging from telecommunications to robotics. However, traditional car manufacturing remains an uncharted venture for these investors, despite Mercedes-Benz’s notable Chinese shareholders.
Any acquisition in this sector would be significant, potentially marking one of China’s most politically sensitive investments. Volkswagen (VW), long a symbol of German industrial strength, faces challenges due to a global economic slowdown, affecting both demand and the push towards green technologies.
By manufacturing electric vehicles (EVs) in Germany for the European market, Chinese EV manufacturers could circumvent EU tariffs applied to cars imported from China. This strategic move might further threaten the competitiveness of European manufacturers.
Potential bids for these factories might stem from private companies, state-owned enterprises, or joint ventures involving foreign entities. Given the sensitivities, it’s likely that Chinese authorities will be involved from the early stages of any potential transaction. Additionally, investment decisions are expected to consider the new German government’s policy stance toward China, especially following the elections in February.
Historically, the economic relationship between Germany and China deepened during Angela Merkel’s chancellorship, boosted by investments and exports, especially from German carmakers to China. However, these ties have faced challenges as the current coalition seeks to reduce its dependence on China. Germany’s Foreign Minister Annalena Baerbock has expressed concerns, labeling President Xi Jinping as a “dictator” and China as an economic rival.
Within Germany, Volkswagen is contemplating alternative functions for its Dresden and Osnabrueck operations as part of a cost-cutting effort aimed at scaling back its German activities. As Europe’s largest automaker, with ownership of iconic brands such as Porsche, Audi, and Skoda, VW has experienced decreasing sales in the face of growing competition from Chinese entities.
Initially, VW executives contemplated closing several plants, but ultimately reached an agreement facing union resistance. Production is set to end at the Dresden plant, currently employing 340 workers making the electric ID.3, by 2025, and at the Osnabrueck site, where 2,300 employees manufacture the T-Roc Cabrio, by 2027.
Sources familiar with the situation reveal VW is open to the idea of selling the Osnabrueck factory to a Chinese investor. A spokesperson noted, “We are committed to finding a continued use for the site. The goal must be a viable solution that takes into account the interests of the company and employees,” though they declined to comment on any specific offer speculation.
However, Chinese companies are reportedly wary of their reception by German unions, which hold significant influence on company advisory boards and often advocate for extensive site and job guarantees. This apprehension is a critical consideration for any prospective Chinese acquisitions.
Stephan Soldanski, a union representative from Osnabrueck, stated that plant workers might be receptive to manufacturing for a VW-China joint venture partner. Soldanski remarked, “I could imagine that we would produce something for a China joint venture … but under the VW logo and under VW standards. That is the key condition.”
As the automotive world closely monitors developments, the potential acquisition of German car factories by Chinese investors illuminates broader themes of industry transformation, global economic relationships, and the shifting dynamics of power within the automotive sector.
