Mercedes CEO Says Brand Sticking With China for the Long Haul

Matt Posky
by Matt Posky

Mercedes-Benz CEO Ola Kallenius has told the German media that the brand has no intention of cutting ties with China, saying such a move would be unwise for the whole of Germany industry. 

"The major players in the global economy, Europe, the U.S. and China, are so closely intertwined that decoupling from China makes no sense," he was quoted as saying in Bild am Sonntag.


With the global situation looking increasingly hectic and economies in varying degrees of disarray, there are a lot of questions about the future landscape of business. Like many Western nations, Germany cut ties with Russia when war broke out in Ukraine. However, the Russian government has reportedly been getting closer to China — which has a vested interest in becoming the dominant regional superpower. Meanwhile, the United States would like to maintain global supremacy and sees both nations as a mounting threat. 


This puts Germany in a difficult position, especially automotive manufacturers. Volkswagen is one of the most popular brands sold within the region by far and Mercedes-Benz moves substantially more product in Asia than the United States. Both markets remain extremely important, though China seems to be the one poised for the most growth in the years to come. 


U.S. brands like General Motors also have a lot riding on relations remaining copesthetic with China. However, America seems increasingly interested in distancing itself from the nation while Germany has grown more reliant on the Chinese market. This has resulted in a lot of speculation and encouraged industry leadership to weigh in on the matter, as noted by Automotive News


German automakers depend on the Chinese car market, the world's largest, and Mercedes counts China's Beijing Automotive Group and Geely Chairman Li Shufu as its two top shareholders.
China accounted for 18 percent of revenues and 37 percent of car sales at Mercedes in 2022 and Kallenius predicted more to come.
"Our sales figures in China are increasing and I am quite optimistic that we will also grow this year. During the corona years, the wealthier Chinese in particular made extraordinary savings," Kallenius said. "This purchasing power should benefit us."


That presumes there are no new global conflicts between nations, not that this would be the first time Germany has found itself going against the grain in Europe. 


Though it also fails to take into account that Chinese automakers all want to be come global brands and already dominate a few segments other automakers (including Mercedes) doesn't really bother with. For example, small EVs are the norm in Central Asia. But German automakers tend to focus on upmarket luxury models, with the only overlap being on customer data harvesting.


"In China, electromobility has so far developed via inexpensive small cars and city cars," said Kallenius. "Well over 90 percent of sales are achieved with e-cars that cost less than 40,000 euros. We don't even compete in that segment."


While China has shown an extraordinary enthusiasm for foreign capital, it has likewise launched the Shanghai Cooperation Organization (SCO). The security bloc incorporates China, India, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Saudi Arabia, Tajikistan and Uzbekistan. Often presented as a trade organization, it’s effectively a stop gap for U.S. influence. 


Fingers are likely being crossed that relations stabilize and none of the involved parties decide to flex their muscles any more than they already have. But history is notoriously hard to predict in advance and is loaded with unsavory moments. Germany may find itself in an extremely undesirable position should the situation worsen and is going to hedge its bets wherever possible.


"We are not naive. Of course we see the political differences and tensions," Mercedes' top dog stated. "The Corona period has shown how fragile the supply chains are. We have to become more resilient here and more independent of individual countries, for example when it comes to lithium batteries."


[Image: pisaphotography/Shutterstock]


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Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • BEPLA BEPLA on May 03, 2023

    China is a huge market - After all, they have the US dollars that were exported in exchange for cheap goods.

    So why would anyone abandon a large lucrative marketplace?


    Russia, on the other hand - just has Oil, and not very good oil either. Only the Oligarchs have money. So who cares about that market?

  • Inside Looking Out Inside Looking Out on May 03, 2023

    It is funny that when China is on precipice of financial and economic collapse Europe and esp Germany suddenly fall in love with China. There war is coming people, wake up, do not flirt with bad actors like Panda Xi. Germany had romance with Putin's regime, how that ended, broken heart?

  • Bd2 Lexus is just a higher trim package Toyota. ^^
  • Tassos ONLY consider CIvics or Corollas, in their segment. NO DAMNED Hyundais, Kias, Nissans or esp Mitsus. Not even a Pretend-BMW Mazda. They may look cute but they SUCK.I always recommend Corollas to friends of mine who are not auto enthusiasts, even tho I never owed one, and owned a Civic Hatch 5 speed 1992 for 25 years. MANY follow my advice and are VERY happy. ALmost all are women.friends who believe they are auto enthusiasts would not listen to me anyway, and would never buy a Toyota. They are damned fools, on both counts.
  • Tassos since Oct 2016 I drive a 2007 E320 Bluetec and since April 2017 also a 2008 E320 Bluetec.Now I am in my summer palace deep in the Eurozone until end October and drive the 2008.Changing the considerable oils (10 quarts synthetic) twice cost me 80 and 70 euros. Same changes in the US on the 2007 cost me $219 at the dealers and $120 at Firestone.Changing the air filter cost 30 Euros, with labor, and there are two such filters (engine and cabin), and changing the fuel filter only 50 euros, while in the US they asked for... $400. You can safely bet I declined and told them what to do with their gold-plated filter. And when I changed it in Europe, I looked at the old one and it was clean as a whistle.A set of Continentals tires, installed etc, 300 EurosI can't remember anything else for the 2008. For the 2007, a brand new set of manual rec'd tires at Discount Tire with free rotations for life used up the $500 allowance the dealer gave me when I bought it (tires only had 5000 miles left on them then)So, as you can see, I spent less than even if I owned a Lexus instead, and probably less than all these poor devils here that brag about their alleged low cost Datsun-Mitsus and Hyundai-Kias.And that's THETRUTHABOUTCARS. My Cars,
  • NJRide These are the Q1 Luxury division salesAudi 44,226Acura 30,373BMW 84,475Genesis 14,777Mercedes 66,000Lexus 78,471Infiniti 13,904Volvo 30,000*Tesla (maybe not luxury but relevant): 125,000?Lincoln 24,894Cadillac 35,451So Cadillac is now stuck as a second-tier player with names like Volvo. Even German 3rd wheel Audi is outselling them. Where to gain sales?Surprisingly a decline of Tesla could boost Cadillac EVs. Tesla sort of is now in the old Buick-Mercury upper middle of the market. If lets say the market stays the same, but another 15-20% leave Tesla I could see some going for a Caddy EV or hybrid, but is the division ready to meet them?In terms of the mainstream luxury brands, Lexus is probably a better benchmark than BMW. Lexus is basically doing a modern interpretation of what Cadillac/upscale Olds/Buick used to completely dominate. But Lexus' only downfall is the lack of emotion, something Cadillac at least used to be good at. The Escalade still has far more styling and brand ID than most of Lexus. So match Lexus' quality but out-do them on comfort and styling. Yes a lot of Lexus buyers may be Toyota or import loyal but there are a lot who are former GM buyers who would "come home" for a better product.In fact, that by and large is the Big 3's problem. In the 80s and 90s they would try to win back "import intenders" and this at least slowed the market share erosion. I feel like around 2000 they gave this up and resorted to a ton of gimmicks before the bankruptcies. So they have dropped from 66% to 37% of the market in a quarter century. Sure they have scaled down their presence and for the last 14 years preserved profit. But in the largest, most prosperous market in the world they are not leading. I mean who would think the Koreans could take almost 10% of the market? But they did because they built and structured products people wanted. (I also think the excess reliance on overseas assembly by the Big 3 hurts them vs more import brands building in US). But the domestics should really be at 60% of their home market and the fact that they are not speaks volumes. Cadillac should not be losing 2-1 to Lexus and BMW.
  • Tassos Not my favorite Eldorados. Too much cowbell (fins), the gauges look poor for such an expensive car, the interior has too many shiny bits but does not scream "flagship luxury", and the white on red leather or whatever is rather loud for this car, while it might work in a Corvette. But do not despair, a couple more years and the exterior designs (at least) will sober up, the cowbells will be more discreet and the long, low and wide 60s designs are not far away. If only the interiors would be fit for the price point, and especially a few acres of real wood that also looked real.
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