Chinese car maker wants to win Germany – criticism of traffic lights

Chinese car manufacturer Chery wants to enter the German market. In a conversation with Julia Fiedler, deputy director general Charlie Zhang accuses the traffic light government of making wrong decisions.

According to Chery’s own information, exports in 2023 were around 700,000 cars. How many countries do you currently sell cars in?

At the moment we are working in more than 80 countries and regions. However, in 2024 we will be bigger because we want to strengthen ourselves in Europe and especially in Germany. We will do it step by step. We are launching our brand in Spain first, followed by Italy and the UK. In Germany we will probably come to the market in the third quarter of 2024.

Why are you so late? Chery has been operating a development center in Raunheim since 2018, but their cars are not yet sold in Germany. Sales were supposed to start in the spring…

We want to make sure we are well prepared. Four key factors are decisive: our products, dealer network, marketing and branding, as well as service and spare parts availability. All of these must be in place before we launch our brands.

Are there already contracts with dealers in Germany?Â

We are in extensive discussions with several groups of potential or future large business owners.

But you haven’t signed any contracts yet?

Not yet. But there is a high probability that this will happen soon.

What types of cars will you bring to the German market?

We want to offer a wide range of electric vehicles. At the same time, we know that cars with combustion engines still make up a large part of the total sales in Germany. So we want to offer a complete solution: combustion engines, battery-electric vehicles and plug-in hybrids.

Electric cars from China have attracted a lot of attention recently and interest is high. Don’t you think you are limiting your offering if you also offer combustion engines?

We thought about this question for a long time. There are other Chinese brands, for example BYD and Nio, that only offer battery-powered cars. However, we want to be great. In China, Chinese companies (car manufacturers) now have a total market share of more than 50 percent. When it comes to electric vehicles, the share of Chinese products is more than 80 percent. The competition of Chinese manufacturers is getting stronger and better. They are bringing more electric cars to market – but not just combustion engines. We cannot ignore this huge market share.

Should German manufacturers be worried that electric cars from China will flood the market with the force of a tsunami?

I don’t think that’s an accurate description of the type of competition. For decades, the premium brand sector was dominated by German brands such as BMW, Mercedes, Audi and Porsche. German brands, including Volkswagen China, have sold millions of cars every year. But now Chinese car manufacturers are getting bigger and stronger. We need a level playing field. Germany is an industrial nation that does a lot of business in China. Now Chinese manufacturers are offering their German customers good cars. I don’t think it’s a tsunami, German automakers are still leaders in many fields.

However, the qualities that German automakers have been known for may no longer apply in the future when cars become smartphones on wheels. What do you think of the German car industry?

Let me put it this way: There is a common “old strand” that represents combustion engines, a century ago. German car manufacturers are very good at this. When it comes to engines and gearboxes, it was hard to find. And then there’s the new rope that battery electric cars represent. Batteries, electric motors, electric controls, intelligent cockpits, autonomous driving, all these technologies. Chinese producers saw an opportunity here and tried to be strong in this matter.

What are the consequences of China’s use of new technology?

If you look at the gap between Chinese manufacturers and German manufacturers, it has definitely narrowed. But when it comes to the fundamentals of car construction, durability, reliability and quality of cars, then German manufacturers are still the leaders.

What does that mean?

There are still many things we need to learn. Volkswagen has been our teacher for many decades. Our CEO used to work for Volkswagen. He always tells us that we should learn from German quality and how cars are produced.

However, the boardrooms in Wolfsburg and Stuttgart are shaking.

This is a difficult time for German car manufacturers. It’s hard to imagine when you’ve been a leader for so many years, but now a new era is beginning. That’s just a smartphone on wheels. He is different. The way we compete, the way you design and develop your products, is changing – and of course that presents some challenges. But I still believe that the two sides can complement each other perfectly. Why not build a mutually beneficial partnership?

Don’t you think that some degree of industrial freedom is necessary for both our countries?

If you look at our factory, you will see many devices and machines made in Germany, Italy and Japan. We buy and use many German machines and systems. It is clear that development needs to be rethought. China used to export toys, clothes, especially cheap products. And suddenly China is not only producing toys but also cars I think we have to adapt to this new reality, this normal

But they have a responsibility not only for Europe, but also for other parts of the world. I have heard that you are very successful in Mexico.

We have established subsidiaries in various countries. In 2022 we launched our brands in Mexico. We currently sell around 4,000 to 5,000 cars there every month.

The US government is not happy with your activities in Mexico. In the United States, high tariffs apply to electric vehicles made in China. The government fears that due to production in Mexico, you can now import your cars into the US through the back door. How do you feel about this?

The United States-Mexico-Canada Agreement (USMCA), the successor agreement to NAFTA, has been in force in North America since 2020. The rules regarding localization are stricter. The United States wanted to set higher requirements for domestic manufacturing in Mexico. The Mexican market is currently big enough for us – it’s a huge market of over 1.2 million cars. On the other hand, Mexico also has a number of free trade agreements with other South American countries and even Europe. In the medium term we can produce in Mexico and export to other countries.

So also for the USA?

We hope to take advantage of free trade agreements to produce in Mexico and export to the United States, especially electric vehicles. But that is not our immediate goal.

The EU is now also investigating anti-dumping duties on Chinese electric vehicles. It is about the alleged irregular subsidies from the Chinese leadership. What does that mean to you?

I think it is a sad decision that the EU launched an anti-subsidy investigation to control Chinese cars. This will obviously have a negative impact on Chinese electric vehicle sales. We can’t change that, we have to accept it.

The German government, for its part, stopped subsidies for buyers of electric cars at the end of last year. How does this affect your company?

That is why we will offer combustion engines. We can’t just focus on the electric car market. With just under 20 percent of new registrations in 2023, this is still small. We want to introduce a strong product portfolio that includes combustion engines, plug-in hybrids and electric vehicles because we want to attract a large market. If you look at Europe as a whole, the individual markets are very different.

Did you expect that Germany would grow rapidly in electric mobility?

Everyone thought that Germany, the largest economy and largest market in Europe, wanted to develop electricity supply and try to achieve zero emissions. But now the federal government has canceled even subsidies for electric cars. In my opinion, there are three important factors in electromobility: affordability, battery range and infrastructure. If these three important factors are missing, it will be very difficult to achieve 100 percent electricity. I was traveling to Frankfurt, Munich and Cologne and looked for charging stations on the road. To be honest, it was very difficult to find especially many. I don’t know how the government plans to develop infrastructure nationally or in Europe. But if the infrastructure is not there – how can you say that you only want to allow zero-emission cars by 2035?

Interview: Julia Fiedler

Charlie Zhang is the Executive Vice President of Chery International and Assistant to the President of Chery Automobile Group.Previously, he held the position of General Manager of the Central and South America region. Zhang has worked for a Chinese car manufacturer for more than 15 years