Economy & Politics

Why RECP is putting German carmakers under pressure

The RCEP free trade agreement could radically change the auto market. German car manufacturers are left behind
The RCEP free trade agreement could radically change the auto market. German car manufacturers are left behindimago images / Jochen Tack

The new super-pact RECP that China has signed with 14 Asia-Pacific countries will radically change the global auto market. Because it strengthens the Asian competitors of the German car manufacturers, as Ferdinand Dudenhöffer from the Center Automotive Research (CAR) warns. The fact that the Europeans are now falling behind with this agreement has far-reaching consequences, which also demonstrate how “naively” Europe and Germany acted on the world market.

“The world is changing quickly with RECP,” says Dudenhöffer. “Since Japan and South Korea are members of the free trade agreement, Toyota, Honda, Nissan as well as Hyundai and Kia have important access to the Chinese car market.” The same applies to suppliers such as Denso, Bridgestone or Sumitomo and important Asian battery suppliers such as Panasonic and Samsung.

The car expert criticizes the pact as a “major political defeat”. And finally, the receipt for the “one-sided US course of the federal government and the EU”. The car manufacturers could only draw one conclusion from Beijing’s super-pact: They urgently need to orientate themselves more towards the Far East: “One way out can only be to build up more productions in Asia,” said Dudenhöffer. The same applies to the suppliers.

However, this also means that auto jobs will be lost in this country. The importance of the RECP free trade zone for the world automobile market is immense. The RECP countries are the countries with the highest growth rates in the world, around a third of the world’s economic output is generated here. HSBC predicts that it will be 50 percent by 2030. In addition, more than two billion people live in this economic area. This year alone, according to projections by the CAR Institute, 27.6 million new cars will be sold here. This corresponds to a world market share of 42.7 percent. Ascending trend. From 2030, almost every second car is expected to be sold here.

A wake-up call for Europe and the USA

“The figures show how naively the EU and the Federal Republic of Germany act in terms of industrial policy in the world market,” criticized auto expert Dudenhöffer. While close allies of the USA, such as Japan and South Korea, worked shoulder to shoulder on trade with China, “our companies will be more affected by tariffs, product harmonization and export restrictions in the future”. Luxury models such as the Mercedes S-Class, the BMW 7 Series or a Porsche 911 are still produced in Germany. In the future, however, it could make sense to relocate these production lines to Asia.

The export figures show how important exports to Asia are: in 2019, 670,000 vehicles produced in Germany were exported to Asia. That is almost 15 percent of all vehicles manufactured in Germany – and it is predominantly the large, expensive vehicles that contain a lot of added value. “With 840,000 employees at car manufacturers and suppliers – if you add that proportionately – 120,000 people were employed in Asian exports. These are not peanuts, ”calculates the auto expert.

For Dudenhöffer there is no getting around China. The large SUV hubs that BMW and Daimler wanted to set up in the USA should also be reconsidered. Even if it is programmed to stress Washington. Because doing business with or in China will not please the USA – even under the new US President Joe Biden. Dudenhöffer still advises weighing up the damage caused by the US customs wars and the risks that cooperation with Beijing could entail.

The USA increasingly transformed into a “world of yesterday”. In the past, it would have been much more clever “not to pillory China all the time and look for its future in the North Atlantic Pact.” In the future, technology leadership will take place in Asia, the auto expert continues. “Bi- or multilateral economic talks and agreements with China and other important countries in Asia are therefore very important. The same applies to research and science. What South Korea or Japan has done would also be possible for us. ”“ Proximity to Asia ”should be the target for the orientation of German and European economic and industrial policy.

Ifo President Clemens Fuest also appealed on Tuesday to respond to the alliance initiated by Beijing, for example through increased initiatives by the European Union. In terms of trade policy, the pact could be a wake-up call in the US and Europe, said the economist: “The EU should, for its part, expand trade agreements with Asian countries and offer the new US President Joe Biden to resume trade talks immediately.” of free trade, a lot of persuasion is still needed here. The experts also agree on this.

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