On Sunday, the CEO of luxury carmaker Mercedes Benz stated that if Germany were to cut economic ties with China, it would endanger most German industries.
The comments were made by the CEO in an interview with newspaper Bild am Sonntag, following a business trip to China, the largest and most important market for the German carmaker.
In the interview, CEO Ola Kaellenius said, “The major players in the global economy – Europe, the USA and China – are so closely intertwined that disengaging from China makes no sense. Decoupling from China is an illusion, and also not desirable.”
In Germany, and the EU overall, concerns have been growing over the issue of economic dependence on China, which has grown to become one of the region’s leading trading partners, as well as the biggest supplier of materials and products which have been deemed critical for the green transition.
The Mercedes CEO’s concerns obviously arise from the importance of the Chinese market to his business. German carmakers are heavily dependent on the Chinese market, which is the largest car market in the world. The main shareholders of Mercedes Benz are the Chinese BAIC Group and Geely Chairman Lu Shufu. According to data from Reuters, 18% of revenues, and 37% of vehicle sales at Mercedes Benz come from the Chinese market.
In the course of the interview, Bild am Sonntag ask the CEO if he could conceive of Mercedes Benz discontinuing its Chinese business, in the event political tensions surrounding Taiwan escalated, similarly to how geopolitical tensions grew with Russia following the invasion of Ukraine. The CEO responded, “That would be unthinkable for almost the entire German industry.”
China supplies 98% of the rare earth elements that Europe uses in its wind-power generation, hydrogen storage, and batteries. China also supplies 97% of the lithium Europe uses in batteries. Since roughly 60% of the world’s lithium is refined in China, the nation holds a dominant position in the processing of rare earths, and that renders Europe highly dependent on the Asian nation. In addition, 80 of Europe’s solar panels come from China.
Kaellenius noted that Germany must become “more resilient” and “more independent of individual countries,” with respect to technologies and items like lithium batteries.
Last month, Ursula von der Leyen, the European Commission President said that decoupling economically from China would not be a viable option for the EU, but that the bloc still must reduce its risk in the relationship and “rebalance” its economic relationships.
