China wants Volkswagen factories. Reason? A clever plan

Luc Williams

China wants to bypass EU customs duties

The main goal of the Chinese is to gain influence over the most important sector of the German economy. Although China has numerous investments in Germany, for example in industries such as telecommunications and robotics, it has not been involved in car production so far. However, it is worth mentioning that Mercedes-Benz has two large Chinese shareholders.

Beijing wants to take advantage of the Volkswagen crisis, which would be a politically significant move. It also has a business justification – producing cars in Germany would allow the Chinese to bypass the tariffs imposed by the EU on the import of electric cars from the Middle Kingdom. Direct entry into the German market would also threaten the competitiveness of European automotive companies.

Sale of Volkswagen factories – conditions

The offer to purchase German factories may come from private and state-owned companies or joint ventures with foreign entities. However, this does not change the fact that Chinese authorities will want to control any potential takeover. Their final decisions will depend on the attitude of the new German government towards Chinese capital, reports Reuters. The Chinese side is also afraid of cooperation with German trade unions, which have significant influence in the local automotive sector.

Volkswagen decided at the end of last year about closure of factories in Dresden and Osnabrück. He wonders about their alternative uses. Leaks indicate that the German company would be interested in selling the second of the mentioned factories to China.

Where does China want to build factories in Europe?

The German manufacturer has not publicly disclosed its estimates of the value of the potentially sold assets. Each of them can bring 100-300 million euros – according to the estimates of one of the bank analysts.

The Chinese are looking for locations in Europe for their factories to circumvent EU tariffs on their electric cars. They opt for smaller European economies like BYD in case Hungarian and Turkey. Leapmotor plans to produce in cooperation with Stellantis in Poland, and Chery Auto will start producing electric vehicles this year at a plant formerly owned by Nissan in Spain.

About LUC WILLIAMS

Luc's expertise lies in assisting students from a myriad of disciplines to refine and enhance their thesis work with clarity and impact. His methodical approach and the knack for simplifying complex information make him an invaluable ally for any thesis writer.