Chinese carmakers have shown interest in Germany's impending factory closures, especially the Volkswagen plant.
A person familiar with the Chinese government's thinking told Reuters that buying a factory in Germany's highly regarded car market would allow China to create influence in a country known for its car brands.
Chinese companies have invested in a range of industries from telecoms to robotics in Germany, Europe's largest economy, but have yet to establish traditional car manufacturing there, even though Mercedes-Benz has two major Chinese shareholders.
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Any such move would likely mark China's most politically sensitive investment yet. Volkswagen has long been a symbol of Germany's industrial prowess but is now threatened by a slowing global economy that has hit demand and a slow transition to green technology.
Producing cars in Germany and selling them in Europe would allow Chinese electric car makers to avoid paying EU tariffs on electric cars imported from China and could pose a further threat to the competitiveness of European manufacturers.
While bids may come from private companies, state-owned enterprises or joint ventures with foreign companies, Chinese authorities reserve the right to approve certain overseas investments and may be involved in any bid from the outset.
Elections could be key to investing
The investment decision will depend on the new German government's stance on China after February's election, the person said.
During Merkel's 16 years in power, the two economies were closely linked, driven by investment and exports from German carmakers to China.
But relations have cooled as the current alliance works to reduce its reliance on China. Foreign Minister Annalena Berbock described President Xi Jinping as a “dictator” and China as a competitor.
A source at the German Foreign Ministry said that China has developed into a systemic competitor.
Volkswagen is exploring alternative uses for its Dresden and Osnabrück plants as it cuts costs as it cuts its German operations. Europe's largest automaker, which owns brands such as Porsche, Audi and Skoda, has seen sales slump as competition from Chinese companies intensifies.
VW executives want to close several plants, but unions are resisting. In a deal reached before Christmas, they agreed to stop operations in Dresden, a factory with 340 employees that produces ID.3 electric cars, from 2025 and in Osnabrück from 2027. production of the T-Roc Cabrio, which employs 2,300 people.
Fox willing to sell Osnabrück
Volkswagen is willing to sell its Osnabrück plant to a Chinese buyer, a person familiar with the company's thinking told Reuters.
“We are committed to finding continued use of the site. The goal must be a workable solution that takes into account the interests of the company and employees,” a spokesman said, declining to comment specifically on speculation about the offer.
The person familiar with China's thinking said Chinese companies are worried about how they will be treated by German unions, which hold half of the seats on German business advisory boards and seek far-reaching venue and job security.
Stephan Soldanski, a union representative in Osnabrück, said workers at the plant would not object to producing products for one of Volkswagen's joint venture partners in China.
“I can imagine we would produce something for a Chinese joint venture… but under a Volkswagen badge and under Volkswagen standards. That's the key condition,” he said.
The factory may be sold for $103 million to $309 million
A spokesman for the Chinese Foreign Ministry said companies that want to invest in Germany should be allowed to do so.
“China has launched a series of opening-up measures to create new business opportunities for foreign companies… It is hoped that Germany will also uphold an open mind and provide Chinese companies with a fair, just and non-discriminatory business environment for investment,” the spokesman told Reuters stated in the company’s statement.
A source familiar with the Chinese government’s thinking, who spoke on condition of anonymity due to the sensitivity of the matter, declined to name specific potential investors.
A banker familiar with the carmaker said it might be cheaper for Volkswagen to sell the plants than to close them entirely, adding that each plant could be sold for 100 million to 300 million euros (103 million to 300 million euros). $309 million).
Volkswagen did not comment on the value of the assets.
Stephan Weil, the governor of Lower Saxony and a member of Volkswagen's supervisory board, declined to comment.
Electric car maker looking for factory
Many Chinese automakers are scouting sites for factories in Europe, the world's second-largest market for electric vehicles, to circumvent tariffs imposed by the European Commission last year in response to what it called unfair Chinese subsidies.
So far, most have chosen to build new plants in low-cost countries with weak unions, such as BYD in Hungary and Turkey. Zero Sports Car plans to cooperate with Stellantis to produce electric vehicles in Poland, and Chery Automobile will start producing electric vehicles this year at the former Nissan plant in Spain.
Chinese investors have investigated factories in Western Europe, including Ford's plant in Saarlouis, Germany, and Volkswagen's Audi plant in Brussels, according to another source familiar with the discussions.
Sources told Reuters in November that Zero Sports Cars was considering using a factory in Germany to build electric vehicles.
Chery said it is considering various European production options And a decision should be made this year.
Its European executives told Reuters in October that while it would be faster to buy an existing factory, the new plant would allow Chery to build to the latest standards.
BYD says it has long-term goals in Europe that are largely independent of short-term national politics.
SAIC Motor, one of Volkswagen's joint venture partners, did not respond to a request for comment.
- Reuters Additional editing by Jim Pollard
See also:
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Trump plans to crack down on China's electric vehicle supply chain
U.S. plans to ban vehicles using Chinese technology from U.S. roads
Rising tariffs in the U.S. and Europe leave Chinese electric vehicle manufacturers with nowhere to go
Raimondo says Chinese electric cars pose national security risk to U.S., EU
EU rejects China's proposal for minimum selling price of electric cars of 30,000 euros
EU supports high tariffs on Chinese electric cars, but negotiations will continue
Chinese EV firm scales back European plans amid subsidy probe
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EU tariff impact: China warns of WTO lawsuit, Tesla to raise prices
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European countries chase Chinese EV factories as EU eyes tariffs
