Mercedes CEO Says Brand Sticking With China for the Long Haul

Matt Posky
by Matt Posky

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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Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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2 of 10 comments
  • BEPLA BEPLA on May 03, 2023

    China is a huge market - After all, they have the US dollars that were exported in exchange for cheap goods.

    So why would anyone abandon a large lucrative marketplace?

    Russia, on the other hand - just has Oil, and not very good oil either. Only the Oligarchs have money. So who cares about that market?

  • Inside Looking Out Inside Looking Out on May 03, 2023

    It is funny that when China is on precipice of financial and economic collapse Europe and esp Germany suddenly fall in love with China. There war is coming people, wake up, do not flirt with bad actors like Panda Xi. Germany had romance with Putin's regime, how that ended, broken heart?

  • Lou_BC Question of the day: Anyone actually care to own an old TVR?
  • Bd2 First, this was totally predictable. 2nd, Genesis already does have hybrids in the form of a 48V mild hybrid, but more performance oriented (supercharged and turbocharged), so not really helping with regard to fuel consumption. 3rd, Hyundai's hybrid systems don't really help as there currently isn't one that would be suitable power-wise and the upcoming 2.5T hybrid system would have to be heavily reworked to accommodate a RWD/longitudinal layout. 4th, it seems that Genesis is opting to go the EREV route with the GV70 the first get the new powertrain.
  • Bd2 Jaguar's problem was chasing the Germans into the mid size and then entry-level/compact segments for volume, and cheapening their interiors while at it.
  • 3-On-The-Tree Aja8888 I expected that issue with my F150 starting at 52,000mi. luckily I had an extended warranty and it saved me almost $8,000. No more Fords for me, only Toyota.
  • Lou_BC I saw a news article on this got a different read on it. Ford wants to increase production of HD trucks AND develop hybrid and EV variants of the SuperDuty. They aren't scaling back EV production. Just building more HD's and EV variants of HD's .