Cutting ties with China would put most of Germany’s industry at risk, the CEO of luxury carmaker Mercedes-Benz warned on Sunday.
Ola Kaellenius was interviewed by newspaper Bild am Sonntag after returning from a business trip to China, the German manufacturer’s largest and the most important market.
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There have been growing concerns in Germany and the EU as a whole about the region’s economic dependence on China, which is one of its leading trading partners and the top supplier of raw materials critical for green transition.
“The major players in the global economy – Europe, the USA and China – are so closely intertwined that disengaging from China makes no sense,” Kaellenius said. “Decoupling from China is an illusion, and also not desirable,” he added.
China has the largest car market in the world, and German carmakers are heavily dependent on it. Mercedes-Benz’s main shareholders are the Chinese BAIC Group and Geely Chairman Li Shufu. In 2022, China accounted for 18% of revenues and 37% of car sales at Mercedes-Benz, according to Reuters.
When asked whether it would be conceivable for Mercedes-Benz to discontinue its business in China, should political tensions around Taiwan escalate as occurred with Russia after the start of the conflict in Ukraine, the Mercedes-Benz boss replied: “That would be unthinkable for almost the entire German industry.”
Europe depends on China for 98% of its rare-earth elements, which are used in wind-power generation, hydrogen storage, and batteries. It also gets 97% of its lithium for batteries from the country. China has a dominant position in processing rare earths, with roughly 60% of the world’s lithium refined in the east Asian country. The EU also gets 80% of its solar panels from China.
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German industry has to become “more resilient” and “more independent of individual countries,” for example when it comes to lithium batteries, Kaellenius said.
European Commission President Ursula von der Leyen said last month that it was not viable for the bloc to decouple from China, but it needed to reduce risk and “rebalance” its economic ties.