German companies concerned by falling prices in China: report

BEIJING, China — Falling prices and weak demand are the main difficulties facing German companies in China, according to a report by a business body that said European tariffs on Chinese electric vehicles are counterproductive.

China is one of Germany’s top trading partners, accounting for a significant portion of their sales in recent years.

But 61 percent of 186 German companies surveyed by the German Chamber of Commerce said “pressure on prices” is by far the biggest problem they face in China.

Weak demand linked to the slowdown in the world’s second-largest economy and geopolitical tensions also ranked among the top concerns, the report showed.

Carmakers made up 21 percent of companies surveyed.

China is the world’s largest car market and the most advanced in terms of electric vehicle (EV) production.

READ: EU seeks roadblocks for Chinese EVs without sparking trade war

Dozens of Chinese EV brands have been established in recent years, supported by state subsidies.

But China’s economic slowdown, which is weighing on consumer spending, has led to a price war between manufacturers, impacting profits.

Price pressure

Foreign manufacturers, who have struggled to adapt to the rapid expansion of China’s EV fleet, are now also competing against Chinese vehicles on home turf.

Price pressure “is of course a result of overcapacity, but our companies are quite aligned on that — that they only can survive those times if they become more competitive,” Maximilian Butek, head of the German Chamber of Commerce, said at a presentation Friday.

The European Union and China are locked in a row over planned new tariffs of up to 38 percent on imports of Chinese EVs.

The European Commission, which launched a probe last year into Chinese EV subsidies, has accused Beijing of unfair practices undercutting Europe’s car manufacturers.

READ: EU to take ‘targeted’ approach on any illegal China subsidies

Germany has previously expressed concerns about applying higher tariffs, fearing reprisals for its car giants, such as Volkswagen, Mercedes-Benz and BMW, which are heavily invested in China.

“Tariffs as suggested now by the EU will not increase the competitiveness of the automotive industry,” Butek said.

“Therefore, we (would) rather advocate for investing into the competitiveness of the European Union, rather than trying to protect the auto industry,” he said, adding that German manufacturers are “dependent” on the Chinese market.

German Economy Minister Robert Habeck will visit China next week for talks on economic ties between the two countries, with his spokesperson noting that the minister “will not be able to avoid addressing” the issue of EU tariffs.

sbr/dhw/sn

© Agence France-Presse