operation cooperation High Hopes in China

The Chinese economy is changing and German companies are benefiting. CEO Dieter Zetsche described Daimler's outlook for China.
Land of promise for carmakers.

"China is and remains a land of enormous opportunities," Daimler chief executive Dieter Zetsche said. "Carmakers should make it their second home."

Mr. Zetsche spoke to executives gathered at an annual China conference hosted by Handelsblatt and HSBC, a bank with headquarters in London and major operations in Asia.

The event brought together managers who discussed possibilities and constraints of work in China.

Mr. Zetsche called for a balanced view of China's economy. "Even if we probably will not experience double-digit growth rates in China again in the foreseeable future, an annual growth rate of 6 to 7 percent is by no means bad news." China’s economy has a solid foundation, he said.

Mr. Zetsche added that people had long said that planned economies don't work. "We learned otherwise."

China has changed in how it generates its GDP, and has long moved beyond its status as the ‘workbench of the world,’ he said. Last year, the services sector for the first time had a higher share of nominal GDP than industry. China will also continue to be more attractive because of the increasing purchasing power in its domestic market.

More than 800,000 households today have spending power of more than $100,000 per year, and by 2025 that number could increase by thirty fold.

This increase is matched by expansion of the automotive market.

"With Mercedes Benz we were able to boost our sales in China in 2014 by almost one-third. An end to the boom in premium cars is not currently in sight, " Mr. Zetsche said.

"The Chinese market is also in a league of its own when it comes to commercial vehicles," he added. Each year, as many heavy and medium-weight trucks are sold there as in North America, Western Europe and Japan combined.

Mr. Zetsche commented on collaboration with domestic carmakers. Daimler has been working together with the BAIC Group in China since 2003, jointly producing passenger cars and engines. "We are convinced that our activities in China are not a one-way street," he said. "Working together well with China always involves give and take."

He emphasized that quality standards are high in China. "It is going so incredibly well that we are even exporting engine components to our German factories," he said.

In China, as in the rest of the world, sooner or later we will all be driving electric cars. Dieter Zetsche, Daimler CEO

Mr. Zetsche also talked about the outlook for electric cars. "In China, as in the rest of the world, sooner or later we will all be driving electric cars." For 2020, the Chinese government plans to have 5 million electric cars on Chinese streets. Mr. Zetsche noted that there is extensive public support for this goal. "I can only emphasize this to German politicians," he said.

Mr. Zetsche noted that Daimler's main challenge is to understand the Chinese market. The company had first started development work there in 2006. By the end of 2015, Daimler aims to increase the number of employees by 500 – 80 percent of them from China. "If China is soon to be our most important market, then we need to have our fingers on the pulse of the customers," he said.

 

Challenges in China-01

 

Handelsblatt's Anja Müller covers companies and markets. To contact the author: [email protected]