Further growth expected for auto industry

The Denza pure-electric car developed by Shenzhen BYD Daimler New Technology Co Ltd, which made its global debut at the Beijing Auto Show in April, is a prime example of the fruitful cooperation between Germany and Chinese automakers on sustainable mobility. Provided to China Daily

German players to continue increasing commitment to 'important market'

In recent years no other country has enjoyed such rapid automotive growth as China.

Since 2000, the country's passenger vehicle market has expanded almost thirty-fold - from 614,000 units to more than 16.3 million new cars in 2013. This accounted for more than one fifth of the global market. And the market volume in China has almost trebled just since the year 2008.

This dynamic process is accompanied by significant growth in the gross domestic product, a rising standard of living and huge expansion of road infrastructure.

Furthermore, the average age of the Chinese population is 37, which makes the Chinese on average nine years "younger" than the Germans.

China's example shows that people's desire for individual mobility, for a car of their own, is found in all cultures on all continents.

The level of motorization in China is still relatively low. Passenger vehicle density is 52 units per 1,000 residents. For comparison, in Germany it is 543 cars per 1,000 people.

Last year the Chinese passenger vehicle market grew by 23 per cent. Demand was also keen at the beginning of this year and car sales in the first five months showed a year-on-year increase of 15 per cent to 7.4 million units.

We expect that the Chinese passenger vehicle market will expand by 15 per cent to 18.7 million units during 2014. The total will then be 6.7 million units more than the Western European market.

The strong competitiveness of the German automotive industry is underscored by the fact that it has kept up with the high speed of developments in China and continues to be successful there.

German automakers

About 30 years ago German automakers were among the first international companies to become active in China. Our technology and investments made key contributions to enable China as an automotive country to continually push up its revs.

In the early stages this built the foundations for the development of our member companies in China.

Since 2009 we have increased our market share by 3 percentage points to 20.5 per cent.

Of course, this success is not solely due to exports from Germany. In China, as in all other major automotive markets, we are pursuing our "two-pillar strategy" comprising exports from Germany and local production.

From 2005 German passenger vehicle production in China increased by a factor of eight to 3.5 million units in 2013. Last year alone, we recorded growth of 20 per cent, and the process is continuing this year.

The huge rise in China's importance as a production location for the German automotive industry can be seen by a longer-term comparison.

In 2000 German car production in China accounted for only 9 percent of total foreign production by German automakers. By 2013 this proportion had risen to 40 per cent.

Another illustration of the increasing significance of China is the fact that German manufacturers and their Chinese partners now produce more cars in the country than they do in the entire EU (excluding Germany), where they built over 2.8 million units in 2013.

Since 2000, China's share of total passenger vehicle exports by German makers has trebled. In 2013, 242,900 cars from German manufacturers were exported to China. Exports of cars from Germany to China in 2013 had a total value of just over 10.3 billion euros ($14 billion).

However, not only Germany benefits from this two-pillar strategy - exports combined with foreign production. This development brings advantages for China, too.

Local assembly has demonstrated faster growth than the exports from German plants. Today, looking back, this appears comprehensible to us - given the large Chinese market and the need for firms to have their own local production.

Yet this development had its foundation in early and very far-sighted decisions on the part of the companies. China attaches importance to having the highest possible amount of "local content" in vehicles. In this area German manufacturers and suppliers have made a considerable contribution in recent years.

Great opportunities

There are great opportunities for Germany to continue participating in deeper cooperation with China in the coming years.

German suppliers have been involved right from the outset as the German passenger vehicle manufacturers established high levels of activity in China. Indeed, they were one factor that made this possible. They too were present in China early on. All the major German suppliers are active in China.

In the past few years, medium-sized firms have also been increasingly active. Their customers include - alongside the German brands - many international and Chinese automakers.

The number of assembly plants of German suppliers in China has grown by more than one third in recent years, to more than 200 sites. The number of employees of German suppliers has increased by 15 percent to more than 70,000.

China is also becoming more and more important to Germany as a supply location. In 2013 exports of parts and accessories from Germany to China had a value of 7.4 billion euros. That represented a rise of 11 per cent from the previous year.

The German Association of the Automotive Industry, or VDA, makes an important contribution.

The German pavilion at the Shanghai Auto Show every two years offers additional suppliers the opportunity to establish and expand activities in China.

About 30 of our medium-sized companies used these opportunities at the trade show in 2013. Most of them already have their own production facilities in China, some of them in joint ventures or in subsidiaries. They want to continue investing. This all shows that this market offers enormous potential to medium-sized suppliers in particular. We at the VDA are delighted to be supporting these commitments.

Changing structure

The Chinese market not only demonstrates high growth rates - its structure is also changing.

In China there is a clear trend towards smaller engines characterized by lower capacity and consumption, greater efficiency and turbo charging. For example, the share of vehicles with larger engines has fallen, while the share with smaller engines has increased. The high level of expertise of German manufacturers and suppliers in developing and producing efficient and economical vehicles and engines can benefit customers in China too.

The number of Chinese cities with at least 1 million residents is still increasing. For this reason we are driving forward technologies for urban mobility.

We also have our eyes on the infrastructure of the entire country: the expressway network in China is being expanded at breathtaking speed. In 2012 alone, it grew by about 7,300 km to a total length of 90,000 km. This means that since 2011 it has been the largest in the world. There is no end to this process in sight, with many more sections planned.

All the indicators - passenger vehicle density, income trends, and infrastructure - therefore point to further growth of the Chinese vehicle market in coming years. The German automotive industry - manufacturers and suppliers alike -will continue to increase commitment to this important market.

German automakers and suppliers enjoy an excellent reputation in China. We see this confidence in us as an obligation to continue our high speed of innovation. The models our manufacturers have on the Chinese market are very innovative products that demonstrate "made in Germany" quality - whether they are assembled in Germany or in China.

With our high R&D investments we are striving to advance zero-emission driving in China and other markets. Today the German automotive industry is leading further CO2 reduction in many segments. We are willing to enter into constructive dialog and cooperation - here both partners can learn from each other.