Chinese Market

Slamming on the Brakes in the Far East

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German cars everywhere, and yet demand is slowing in China.
  • Why it matters

    Why it matters

    A slowdown of the Chinese car market could hurt the bottom line of German carmakers VW, BMW and Daimler.

  • Facts

    Facts

    • The Chinese automotive industry association predicts a modest growth of 3 percent in 2015 in the Chinese car market, not the expected 7 percent.
    • One in four BMWs and one in three VWs and Audis are sold in China.
    • BMW had to support its Chinese dealers to the tune of nearly €700 million at the start of this year.
  • Audio

    Audio

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Harald Krüger and Herbert Diess waited for their chance for a long time. For almost seven years, both of them sat on the management board of BMW.

These were exciting times for them as crown princes: almost the entire industry collapsed during the financial crisis, then it experienced a boom unlike any the sector had ever known. While assembly lines in Europe were standing still, China began to rise out of nothing to become the largest car market in the world. The Far East was the destination for shipments of inventory that was lying around like a dead weight in Germany.

Even if the then-head of BMW, Norbert Reithofer, issued emphatic warnings about the “sweet poison” of the Chinese automotive boom, the luxury carmaker continued to sell more and more vehicles there each month. And for that reason, Mr. Reithofer was able to take his leave amid record sales figures when he moved to the supervisory board.

Since May, Harald Krüger has been the head of BMW. And in July, Herbert Diess took over the Volkswagen passenger car division, as the crown prince of company head Martin Winterkorn.

In parallel, however, things also took a turn for the worse in China. The turbocharged growth came to an end, economic growth is slackening, the stock market has crashed and, with its campaign against corruption, the government is making it more difficult to sell luxury cars. Instead of 7 percent, the largest market for cars in the world will grow in 2015 by 3 percent at the most, warns the Chinese automotive industry association. That sounds like a screeching application of brakes.

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