Germany’s share of world trade in mechanical engineering goods—a sector that employs about 1.3 million Germans—shrank to 16.1% from 19.2% in the decade through 2018, while China’s share rose to 13.5% from 8.5% over the period, according to VDMA data.
China has since continued to expand its share of global markets most relevant to German engineering firms, such as infrastructure, according to a study published last month by Baker McKenzie, a law firm.
In December, a Chinese engineering group, CRRC Tangshan Co., won a €50 million contract to build 18 trains for Metro do Porto, the light-rail network in Portugal’s second-largest city. It was the first train-building contract for a Chinese company in the European Union, beating out
AG of Germany, among others. Officials thought the trains seemed sturdy and looked almost Italian by design, according to a person familiar with the decision.
Jorge Morgado, a spokesman for Metro do Porto said the Chinese bid won based on factors including price, technical quality and design, and came in at €6.5 million less than Metro do Porto’s initial estimate to buy the trains.
Stefan Brandl, chief executive of ebm-papst Group, which builds electric motors and fans used in cars and household devices, said the new reality dawned on him three years ago, when he noticed an increase in the quality of competing products from China.
China remains the company’s second most important market after Germany, but the company’s Chinese sales had stagnated for months even before the pandemic kicked in, after previously growing regularly at double-digit levels, he said.
At large trade fairs that are starting to reopen around Germany, Chinese companies had until recently shown up with small, old-fashioned stands, said Tim Loeschner, a German who is general manager of NGC Europe, the local unit of
Co. Now, he says, “you can’t tell the difference between many Chinese and German manufacturers.”
Chinese exhibitors at the Hannover industry trade fair, one of the world’s largest trade shows for investment goods, made up almost a fifth of the total last year compared with 13.6% in 2015, according to the organizers.
In 2019, German exports to China rose at their weakest pace since 2015, according to government figures. Even as the Chinese economy now rebounds from its coronavirus trough, German firms aren’t benefiting as much as they did after the 2008 financial crisis, said ebm-papst’s Mr. Brandl. He expects his company’s Chinese sales to decline by 3% to 4% this year and only return to their precrisis level next year.
Germany’s midsized engineering companies, often family-owned and bank-financed, are facing off against giant state-funded Chinese companies that benefit from vast economies of scale and produce everything in-house, said Sebastian Bauer, managing director of Bauer Maschinen GmbH, an industrial equipment manufacturer based in Bavaria.
“Industrial machines are not a luxury good. Customers are interested in both quality and price,” said Mr. Bauer.
Even Germany’s storied auto industry is under siege. China’s
Ltd., known as CATL, is now the world’s largest producer of batteries for electric vehicles. CATL is building a battery factory in Germany that will be about three times the size of
Inc.’s Gigafactory, to supply European car makers.
Meanwhile Germany’s Bosch GmbH, the world’s largest automotive supplier, has said it wouldn’t build batteries for electric cars, even though its business in combustion-engine components is fading. Instead, it said it was cooperating with CATL to build batteries.
Analysts estimate that batteries account for about 40% of the cost of an electric car. The German government estimated in a report last year that nearly half the country’s 870,000 auto jobs could vanish with the switch to electric vehicles.
Last year, Bogestra AG, which operates in the cities of Bochum and Gelsenkirchen in the Ruhr Valley—Germany’s rust belt—became the first public transit company to order electric buses from China. The 20 buses from BYD Auto Co. will join older buses from Mercedes-Benz and Czech manufacturer Solaris Bus & Coach SA. A Bogestra spokesman said the company’s decision to go with BYD was based on the sales price, the cost of operating the vehicles and quality.
Many German executives still see China as their largest market. Yet in private, they say they are running out of patience with bureaucratic obstacles, forced technology transfers, subsidies and assorted protectionist barriers long seen as the price for accessing the market. Some are calling for Berlin to mimic President Trump’s tough approach to Beijing.
“U.S. aggressiveness is useful because it means Germany can take positions that would have looked aggressive two years ago but now look reasonable,” said Jeromin Zettelmeyer, a former senior German economics ministry official who is now deputy director for strategy at the International Monetary Fund in Washington.
German officials have recently signaled a more assertive diplomatic stance toward China. They say the nation will switch its focus toward Asian democracies including Japan and South Korea, amid disputes with China over issues ranging from fair access to its market to human rights.
Norbert Röttgen, a political ally of Chancellor Angela Merkel who chairs Parliament’s foreign affairs committee, said China would only need Germany as long as Germany retained its technological edge.
“My fear is that this window is closing, China is progressing in achieving more and more technological leadership, and we are stagnating,” he said.