Germany wants to use less Chinese materials in cars

Germany wants to reduce dependence on China, its most important trading partner, including for raw materials it imports to make semiconductor chips and electric vehicle batteries.

Calling China “at the same time a partner, a competitor and a systemic competitor,” German Chancellor Olaf Scholz has released a high-level strategy document that affirms its values ​​and outlines how the country is going to work. This will protect your interests.

Germany said it would diversify its supply chain to spread risks more widely.

Scholz wrote on Twitter: “The goal is not to disconnect us.

“However, we want to avoid future critical dependencies. With [the strategy] we are responding to a China that is changing and taking a more offensive stance.”

“Our first priority is to mitigate such risks quickly at a cost that the German economy can afford, especially if such risks involve products essential to the German economy. health, energy transition or technological innovation,” the strategy document reads.

Strategy document specifically cites Germany’s dependence on China for a variety of metals, rare earths and lithium batteries.

It says that the German raw materials partnership will “benefit all the countries involved”, with the aim of “supporting our partners in sustaining the creation of more value”. in their country”.

“In doing so, we not only promote prosperity in the countries of origin, but also the long-term competitiveness of companies there by absorbing expertise and innovation, independent of raw material extraction.”

It’s not the only country looking to reduce reliance on raw materials for electric vehicle batteries, with the recently passed U.S. Inflation Reduction Act encouraging automakers to produce EVs and local battery.

Germany said it “does not pursue decoupling from China” in the technology sector, as “creating separate technical layers is not in our favor”.

However, it said it is strengthening international cooperation in the field of technological innovation and aims to strengthen cooperation with “partners who share our values”.

Germany said it was not only reducing its reliance on China as a measure to reduce risks, but also in response to concerns about failures in the Asian superpower related to civil and political rights as well. such as limiting contact with research institutes and government agencies.

It also argues that China’s economic strategy “aims to make the country less dependent on other countries, and at the same time make international production chains more dependent on China”.

“In terms of foreign policy, China is pursuing its interests much more assertively and is trying to reshape the existing rules-based international order in various ways,” the document reads.

“This is having an impact on European and global security,” it added, noting that the country’s relations with other countries “have deteriorated significantly as a result of this aggressive approach.” .

It also details various geopolitical concerns, including China’s growing influence in the Indo-Pacific region, strengthened ties with Russia, and massive defense spending. second in this country.

However, it says that despite systemic competition, the two countries can cooperate – provided the conditions are fair.

China is an important market for German carmakers.

Volkswagen was one of the first foreign automakers to form a joint venture with a Chinese partner and built a factory there in the 1980s.

Fast forward to the 21st century and it still holds a significant market share in China.

While BYD took first place among automakers in China last year when it comes to retail sales, with 1,804,624 vehicles, if you combine the sales of the two domestic joint ventures. of Volkswagen, the total is 3,022,537 vehicles.

BMW and Mercedes-Benz also have joint ventures in what has become the world’s largest auto market.

However, the market has become a lot more competitive with Chinese automakers having learned quite a bit over the years and launching increasingly sophisticated vehicles with modern technology. thoroughly.

Not only that, Chinese automakers have been expanding their global presence, including in Europe itself.

In addition to vehicles owned by Chinese brands such as Lotus, Polestar and Volvo, the European electric vehicle market is also filled with Chinese names such as Aiways, BYD, GWM (through the Ora brand), MG, Nio and Xpeng. Some of these companies, like MG and GWM, also sell hybrid or internal combustion engine vehicles.