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?

  • Leonard Ostrander We own a 2017 Buick Envision built in China. It has been very reliable and meets our needs perfectly. Of course Henry Ford was a fervent anti-semite and staunch nazi sympathizer so that rules out Ford products.
  • Ravenuer I would not.
  • V8fairy Absolutely no, for the same reasons I would not have bought a German car in the late 1930's, and I am glad to see a number of other posters here share my moral scruples. Like EBFlex I try to avoid Chinese made goods as much as possible. The quality may also be iffy, but that is not my primary concern
  • Tsarcasm No, Japan only. Life costs by Rank:#1 - House (150k+)#2 - Education (30k+)#3 - Automobile (30k+) why waste hard earned money in inferior crap => Korean, Chinese, and American cars are trash. a toyota or honda will last twice as long.
  • Tassos In the 90s we hired a former PhD student and friend of mine, who 'worked' at GM "Research" labs, to come work for us as a 'temp' lecturer and get paid extra. He had no objection from GM, came during the day (around 2 PM), two hours drive round trip, plus the 1.5 hour lecture, twice weekly. (basically he goofed off two entire afternoons out of the five) He told me they gave him a different model new car every month, everything (even gas) paid. Instead of him paying parking, I told him to give me the cars and I drove them for those 90 mins, did my shopping etc. Almost ALL sucked, except the Eldo coupe with the Northstar. That was a nice engine with plenty of power (by 90s standards). One time they gave him the accursed Caddy Catera, which was as fun driving as having sex with a fish, AND to make it worse, the driver's door handle broke and my friend told me GM had to pay an arm and a leg to fix it, needed to replace almost the whole damned door!