Profitability remains the main concern among European automakers in China, BMW’s China CEO said, as cutthroat competition among carmakers within the country has added to the weighty external challenges brought by tariffs from the European Union. “BMW advocates free trade. We’re against tariffs,” Sean Green, President and CEO of BMW China, told the South China Morning Post at the annual China Development Forum (CDF) in Beijing. Green said his company is also a tariff victim, as the China-made Mini series under the BMW umbrella is also subject to Brussels’ extra duties when exported to Europe. But he is holding out hope that dialogue yields common ground. “We hope the EU Commission could have constructive discussions on how to find a compromise during their visit to Beijing,” he said. “That’s in everyone’s benefit to have a more equal tariff situation.” China’s Commerce Minister, Wang Wentao urged BMW to continue playing an “active role” in encouraging Brussels to reach a solution quickly, when meeting the company’s Chairman Oliver Zipse in Beijing. Wang said resolving the dispute could send a clear, positive signal to the world when global trade is being hampered by unilateralism and protectionism. Green said Chinese investments into Europe through joint ventures with local firms could be one option, though not the only option.
Green also discussed how China is naturally part of the global supply chain. “We encourage our suppliers in China to go and support us elsewhere in the world, whether that’s in the Americas or in Europe.” Green, meanwhile, laments the “challenging” business environment for automakers in China, where profitability levels have come into question. “Hyper competition, discussed in the ‘two sessions’, is not easy to fix but has to be addressed for sustainable, profitable business,” he said. “I expect to see certain actions taken this year by the central and local governments.” Last summer, BMW began raising prices of some models in China, taking a determined stance against vicious price wars that crimped profit margins. “Everybody has to compete in the market, and consumers decide where the competition is. If consumers demand they pay less, you have to compete within this segment. It affects everybody,” Green admitted. “We’re caught within this very intense price competition. Luckily, we have products outside that bottom-end zone that could keep us in a healthy position.”
Green expects the market to remain flat this year. “If you look at the total market, it grew last year, but total revenues dropped, with pricing competition one of the biggest challenges,” he said. “We have to find ways to keep profitability within the industry, and that benefits OEMs, the supply chain and also the dealer network. We have to keep stability and sustainability.” But Green also said the formidable rise of China’s home-grown manufacturers is natural. “If you look at Europe or the U.S., domestic brands are usually the strongest. It doesn’t come as a surprise that domestic brands get stronger in China,” Green said. “China is still the world’s biggest car market, and so long as you deliver what Chinese consumers need, you have a great chance of success. The future landscape that we see is full of opportunities,” he said, as reported by the South China Morning Post.
