The snap elections in Germany will also be closely observed in Beijing. Amid numerous global challenges and an unpredictable US partnership under Trump, Germany’s strategic alignment towards China becomes a crucial factor that no political party can ignore. Manuel Liu asked the parliamentary groups in the German Bundestag which China policy direction they want to take: Is it the same old, in line with the existing China strategy, or a new course that takes current developments into account?
One thing became clear: the far-right AfD and the Left are swimming against the tide. Both parties emphasize the economic benefits of a deeper partnership with China. The AfD even calls for abolishing the Supply Chain Act and total restraint in the Indo-Pacific. The Left also advocates closer relations to tackle global challenges such as climate change or the war in Ukraine. Our overview shows what the others think and what positions they take.
Maximilian Fichtner, a battery expert from the Helmholtz Institute in Ulm, explains in an interview with our ESG colleague Carsten Hübner that the German car manufacturers made a clear mistake by not focusing on their own battery production. While the German companies, after tentative attempts, resorted to the idea that batteries could also be purchased, the Chinese “shoveled mud for five years” to achieve acceptable results. Some of them are now world market leaders. The former top dogs from Mercedes and Co. have become supplicants.
Fichtner concludes that the fundamental problem underlying their misjudgments still prevails today: They don’t want to take any risks and, above all, seek short-term profits. But it takes time to build up the necessary know-how. The EU tariffs could provide a final small buffer to catch up after all. “The only question is how this time will be used.”
Whoever wins the upcoming snap election in Germany will face many challenges from day one: The German economy is slowing down, the war in Ukraine is entering its third year, and Donald Trump’s return to the White House raises many geopolitical questions. Sooner or later, developments in all these problem areas will also depend on China. This makes it more important than ever in this parliamentary election campaign how the various political parties position their China policy.
How do they want to shape Sino-German relations? Which aspects of the current government’s China strategy do they want to retain, which do they want to adjust, and which do they want to abandon, Table.Briefings asked the parliamentary groups in the Bundestag. The conclusion: the Social Democratic Party (SPD) and the Green Party want to build on the existing China strategy, the Free Democratic Party (FDP) and the Christian Democratic Union (CDU/CSU) take a more critical view of current relations, while the far-right AfD and the Left Party want to expand partnership with China.
For the SPD, the China strategy adopted in 2023 is a very good basis “for our China policy – regardless of the outcome of the parliamentary elections,” says Nils Schmid, foreign policy spokesperson for the SPD parliamentary group in the Bundestag. The party continues to rely on de-risking. Schmid says: “If we continue this de-risking, we can better manage the risks while maintaining economic contacts with China, but on a more secure basis.”
The goal of minimizing risk was an important part of the German national China strategy and European China policy. However, Chancellor Olaf Scholz attempted to secure market access and orders for German companies in China in parallel, a move reminiscent of Germany’s China policy over the past three decades.
Schmid sees less need for de-risking at companies and instead focuses on critical infrastructure. The SPD would like to create common rules in the EU for areas such as the rail network, 5G/6G networks, artificial intelligence, quantum computing and goods for military use. Regarding the latter, Schmid proposes outbound investment screening at the EU level. The SPD also wants to work with the EU to protect supply chains – for example, of active medical ingredients – and diversify sources of raw materials such as rare earths.
Moreover, the Social Democrats in the EU want a “strategically oriented and coordinated industrial and innovation policy,” says Schmid, in order to gain an innovative and technological edge in certain core areas, as the United States and China have done. The aim is to eliminate expensive patenting, market fragmentation, slow standardization and a lack of expertise, which are seen as obstacles to innovation.
The SPD also plans to improve support along the entire innovation development chain. The aim is to “kick-start” the transfer between state-funded research and marketable production and, ultimately, value creation in Germany and Europe, says Schmid. However, he acknowledges that much depends on the EU. He therefore calls for expanding the EU’s global partnerships, such as the Mercosur agreement with four South American countries.
The SPD also wants to expand relations with countries in the Indo-Pacific. The parliamentary group unanimously adopted a corresponding position paper on Tuesday, in which the region is described as the “decisive center of gravity of the world order of today and tomorrow.” Accordingly, the SPD wants to expand its expertise on both China and the Indo-Pacific.
The Green Party also wants to stick to its current China policy. “With the China strategy, we have laid the foundation for a new, more realistic China policy,” says deputy parliamentary group leader Agnieszka Brugger. “After the naive glossing over of the Grand Coalition, the China strategy of this federal government focuses on our security, protecting our infrastructure and working for a rules-based international order and human rights.”
Brugger emphasizes the cooperation in the Indo-Pacific, such as the passage of the Taiwan Strait by the frigate “Baden-Württemberg” and the supply vessel “Frankfurt am Main.” These “consistent actions” would bring the “clever words” of the China strategy to life, Brugger continues. According to Brugger, “reducing vulnerabilities and taking a clear stance” is more important than revising the strategy. The Greens would also like to represent their own values and interests with Europe in a joint China policy.
The FDP intends to adapt the China strategy to highlight China’s role as Europe’s rival more clearly, says Ulrich Lechte, foreign policy spokesperson for the FDP parliamentary group in the Bundestag. One reason for this is Trump’s re-election and the resulting geopolitical changes. The FDP wants to prevent Germany and Europe from falling into a “tariff spiral” between the United States and China.
To this end, the party aims to reduce dependencies. To achieve this, the economic liberals remain committed to de-risking, particularly in critical infrastructure, diversifying supply chains and building up competencies in Europe. In addition to competition and system rivalry, the FDP wants to “reflect our own attitude towards China even more intensively, and consistently fill the China strategy with life,” says Lechte.
When asked, the CDU/CSU faction referred to its China strategy published in 2023, its proposal for a China commission in the Bundestag and its election manifesto, which is yet to be published. The proposed China Commission is supposed to review “security-relevant economic relations” with China.
In the 2023 position paper, the CDU/CSU presents China with the EU’s familiar triad of partner, systemic competitor and economic rival. In order to counter a Sinocentric global order, the CDU and CSU want, for example, to develop a strategically oriented transatlantic China policy between the USA and the EU, focus on reciprocity in the tense trade relations and establish a national security council within the Federal Chancellery to “ensure coherence in China policy.”
All major parties currently rule out a coalition with the AfD, which is why it will probably continue to pursue its China policy goals as part of the opposition. The AfD sees no clear positioning of Sino-German relations in the government’s China strategy, a lack of action plans and inadequate involvement of the business community.
The AfD would prefer to strengthen Germany’s partnership with China as an essential trading partner, says deputy parliamentary group leader Stefan Keuter. This includes abolishing the Supply Chain Act. Instead, the party wants to place “great emphasis” on market access, reciprocity, protection of intellectual property and equal opportunities. The AfD also wants to reduce the German military presence in the Indo-Pacific.
The Left Party fights for a place in the Bundestag. MP Gregor Gysi aims to promote “good relations” with China, which he says are necessary to end the war in Ukraine, defeat world hunger, achieve climate targets and resolve the Taiwan question peacefully.
The Sahra Wagenknecht Alliance did not respond to Table.Briefings’ question regarding its China policy focus.
Mr. Fichtner, the crisis at Northvolt reinforces the impression that Europe is struggling to catch up with China in battery production. Does the European automotive industry even need its own battery production?
In-house battery production is important because the battery is the part of the electric car with the greatest added value. We are talking about around a third of the car price. Meanwhile, batteries have become cheaper and are somewhere between 6,000 and 8,000 euros. But there is still a margin. If that is lost, you have to look at how you can still produce the rest of the vehicle economically.
It is hard to imagine that the German car manufacturers have failed to notice this.
This has actually been ignored in the past. Instead, in the 2010s, they said that batteries are bought-in parts, and a car manufacturer doesn’t need to bother with them. In hindsight, that was a clear misjudgment.
Is it so difficult to build EV batteries?
When a battery manufacturer sets up a new production line, it turns out that many cells are good. Others, however, are faulty or do not have the desired performance. They are then rejected. This is known as the scrap rate.
The scrap rate is what can kill the whole thing. Ultimately, the scrap rate must fall to a low single-digit percentage. All battery manufacturers had to go through this, including the Chinese. They shoveled mud for five years, but they pulled through. They ended up becoming the global market leader.
Couldn’t German companies have done the same?
In the 2010s, we had an entire battery cell production facility at Li-Tec Battery in Kamenz. The company was then partially acquired by Daimler AG (now the Mercedes-Benz Group). There were initial problems there, too. Because the company was only in the black in single figures, Daimler eventually said: It’s not profitable, we’re closing it down. I believe that with a little more time, something great could have been achieved here.
The problem is that they don’t want to take risks and generate short-term profits. But building up the necessary expertise and fine-tuning these tiny adjustments to achieve something close to perfection takes time. That doesn’t happen overnight. If we don’t think more long-term, then others will supply us for everything that is similar in some way.
Is there a realistic chance of Europe catching up in battery production?
A cutthroat price war is currently raging in China. From the outside, the Chinese economy always looks relatively homogeneous. But internally, competition is fierce. This has led to an undercutting race and overproduction.
In some cases, the price of battery cells is now well below 100 US dollars per kilowatt-hour. This has always been regarded as the limit at which an electric car can be cheaper than a gasoline car of the same size. This is actually good news. In China, two-thirds of electric cars are now cheaper than comparable gasoline cars.
However, this makes it harder for Europeans to enter the market. Especially as we have different framework conditions here, such as higher energy prices. Labor costs are also higher, although the latter does not play such a major role. Partly because production is largely automated and because skilled workers in China now also earn quite well.
Do the tariffs imposed by the EU on EVs from China have any effect in this context?
The tariffs can help buy some time. The only question is how to use this time. Do the automotive industry and investors have the perseverance to get through the difficult transition phase? Then, in my view, they could also become competitive. If they remain largely stuck in the gasoline car sector, they will dwindle in this ever-shrinking niche and eventually disappear.
Incidentally, Brussels was already thinking about how to keep up with the Chinese five years ago. I was involved in these deliberations. The result was to focus on green battery cells. In other words, battery cells that meet certain minimum standards in terms of CO2 footprint, composition and the like.
Isn’t Northvolt heading in this direction?
Exactly. The carbon footprint of their battery cell in 2020 was between 120 and 150 kilograms of CO2 per kilowatt-hour. As far as I know, Northvolt is now at 30 or 40 kilograms of CO2 per kilowatt-hour and is expected to reach 10 next year. That means it will no longer take 20,000 or 30,000 kilometers of driving, but perhaps only 2,000 or 3,000 kilometers until the carbon footprint of an electric car is better than that of a gasoline car over its life cycle. That is excellent work.
But now they have stumbled. One reason is that the scrap rate is apparently still comparatively high, which is a typical ramp-up effect. They have to sell their cells at too high a price and are not yet able to deliver reliably. It has simply taken longer. I don’t think Northvolt is really to blame here. The matter is simply complex.
But in the end, BMW withdrew its two-billion-euro order. BMW now sources its battery cells from Chinese and Korean manufacturers, some of which produce in Hungary.
Maximilian Fichtner is Professor of Solid State Chemistry at the University of Ulm and has been Managing Director of the Helmholtz Institute Ulm for Electrochemical Energy Storage since October 2021. He is also spokesperson for the Battery Cluster of Excellence POLiS (Post Lithium Energy Storage). With 20 patent applications and 450 publications, he is considered one of Germany’s leading battery researchers.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.
Fishtail wrinkles (鱼尾 yúwěi “fishtail”; 纹 wén “pattern, grain,” here from 皱纹 zhòuwén “wrinkles”) appeal to some, while others fight them with Botox. Be that as it may: In the Western world, we know the small wrinkles in the eye area with their radial structure colloquially as “crow’s feet,” whereas the Chinese tend to refer to them as “fishtails.”
Want more? Go to www.new-chinese.org
The snap elections in Germany will also be closely observed in Beijing. Amid numerous global challenges and an unpredictable US partnership under Trump, Germany’s strategic alignment towards China becomes a crucial factor that no political party can ignore. Manuel Liu asked the parliamentary groups in the German Bundestag which China policy direction they want to take: Is it the same old, in line with the existing China strategy, or a new course that takes current developments into account?
One thing became clear: the far-right AfD and the Left are swimming against the tide. Both parties emphasize the economic benefits of a deeper partnership with China. The AfD even calls for abolishing the Supply Chain Act and total restraint in the Indo-Pacific. The Left also advocates closer relations to tackle global challenges such as climate change or the war in Ukraine. Our overview shows what the others think and what positions they take.
Maximilian Fichtner, a battery expert from the Helmholtz Institute in Ulm, explains in an interview with our ESG colleague Carsten Hübner that the German car manufacturers made a clear mistake by not focusing on their own battery production. While the German companies, after tentative attempts, resorted to the idea that batteries could also be purchased, the Chinese “shoveled mud for five years” to achieve acceptable results. Some of them are now world market leaders. The former top dogs from Mercedes and Co. have become supplicants.
Fichtner concludes that the fundamental problem underlying their misjudgments still prevails today: They don’t want to take any risks and, above all, seek short-term profits. But it takes time to build up the necessary know-how. The EU tariffs could provide a final small buffer to catch up after all. “The only question is how this time will be used.”
Whoever wins the upcoming snap election in Germany will face many challenges from day one: The German economy is slowing down, the war in Ukraine is entering its third year, and Donald Trump’s return to the White House raises many geopolitical questions. Sooner or later, developments in all these problem areas will also depend on China. This makes it more important than ever in this parliamentary election campaign how the various political parties position their China policy.
How do they want to shape Sino-German relations? Which aspects of the current government’s China strategy do they want to retain, which do they want to adjust, and which do they want to abandon, Table.Briefings asked the parliamentary groups in the Bundestag. The conclusion: the Social Democratic Party (SPD) and the Green Party want to build on the existing China strategy, the Free Democratic Party (FDP) and the Christian Democratic Union (CDU/CSU) take a more critical view of current relations, while the far-right AfD and the Left Party want to expand partnership with China.
For the SPD, the China strategy adopted in 2023 is a very good basis “for our China policy – regardless of the outcome of the parliamentary elections,” says Nils Schmid, foreign policy spokesperson for the SPD parliamentary group in the Bundestag. The party continues to rely on de-risking. Schmid says: “If we continue this de-risking, we can better manage the risks while maintaining economic contacts with China, but on a more secure basis.”
The goal of minimizing risk was an important part of the German national China strategy and European China policy. However, Chancellor Olaf Scholz attempted to secure market access and orders for German companies in China in parallel, a move reminiscent of Germany’s China policy over the past three decades.
Schmid sees less need for de-risking at companies and instead focuses on critical infrastructure. The SPD would like to create common rules in the EU for areas such as the rail network, 5G/6G networks, artificial intelligence, quantum computing and goods for military use. Regarding the latter, Schmid proposes outbound investment screening at the EU level. The SPD also wants to work with the EU to protect supply chains – for example, of active medical ingredients – and diversify sources of raw materials such as rare earths.
Moreover, the Social Democrats in the EU want a “strategically oriented and coordinated industrial and innovation policy,” says Schmid, in order to gain an innovative and technological edge in certain core areas, as the United States and China have done. The aim is to eliminate expensive patenting, market fragmentation, slow standardization and a lack of expertise, which are seen as obstacles to innovation.
The SPD also plans to improve support along the entire innovation development chain. The aim is to “kick-start” the transfer between state-funded research and marketable production and, ultimately, value creation in Germany and Europe, says Schmid. However, he acknowledges that much depends on the EU. He therefore calls for expanding the EU’s global partnerships, such as the Mercosur agreement with four South American countries.
The SPD also wants to expand relations with countries in the Indo-Pacific. The parliamentary group unanimously adopted a corresponding position paper on Tuesday, in which the region is described as the “decisive center of gravity of the world order of today and tomorrow.” Accordingly, the SPD wants to expand its expertise on both China and the Indo-Pacific.
The Green Party also wants to stick to its current China policy. “With the China strategy, we have laid the foundation for a new, more realistic China policy,” says deputy parliamentary group leader Agnieszka Brugger. “After the naive glossing over of the Grand Coalition, the China strategy of this federal government focuses on our security, protecting our infrastructure and working for a rules-based international order and human rights.”
Brugger emphasizes the cooperation in the Indo-Pacific, such as the passage of the Taiwan Strait by the frigate “Baden-Württemberg” and the supply vessel “Frankfurt am Main.” These “consistent actions” would bring the “clever words” of the China strategy to life, Brugger continues. According to Brugger, “reducing vulnerabilities and taking a clear stance” is more important than revising the strategy. The Greens would also like to represent their own values and interests with Europe in a joint China policy.
The FDP intends to adapt the China strategy to highlight China’s role as Europe’s rival more clearly, says Ulrich Lechte, foreign policy spokesperson for the FDP parliamentary group in the Bundestag. One reason for this is Trump’s re-election and the resulting geopolitical changes. The FDP wants to prevent Germany and Europe from falling into a “tariff spiral” between the United States and China.
To this end, the party aims to reduce dependencies. To achieve this, the economic liberals remain committed to de-risking, particularly in critical infrastructure, diversifying supply chains and building up competencies in Europe. In addition to competition and system rivalry, the FDP wants to “reflect our own attitude towards China even more intensively, and consistently fill the China strategy with life,” says Lechte.
When asked, the CDU/CSU faction referred to its China strategy published in 2023, its proposal for a China commission in the Bundestag and its election manifesto, which is yet to be published. The proposed China Commission is supposed to review “security-relevant economic relations” with China.
In the 2023 position paper, the CDU/CSU presents China with the EU’s familiar triad of partner, systemic competitor and economic rival. In order to counter a Sinocentric global order, the CDU and CSU want, for example, to develop a strategically oriented transatlantic China policy between the USA and the EU, focus on reciprocity in the tense trade relations and establish a national security council within the Federal Chancellery to “ensure coherence in China policy.”
All major parties currently rule out a coalition with the AfD, which is why it will probably continue to pursue its China policy goals as part of the opposition. The AfD sees no clear positioning of Sino-German relations in the government’s China strategy, a lack of action plans and inadequate involvement of the business community.
The AfD would prefer to strengthen Germany’s partnership with China as an essential trading partner, says deputy parliamentary group leader Stefan Keuter. This includes abolishing the Supply Chain Act. Instead, the party wants to place “great emphasis” on market access, reciprocity, protection of intellectual property and equal opportunities. The AfD also wants to reduce the German military presence in the Indo-Pacific.
The Left Party fights for a place in the Bundestag. MP Gregor Gysi aims to promote “good relations” with China, which he says are necessary to end the war in Ukraine, defeat world hunger, achieve climate targets and resolve the Taiwan question peacefully.
The Sahra Wagenknecht Alliance did not respond to Table.Briefings’ question regarding its China policy focus.
Mr. Fichtner, the crisis at Northvolt reinforces the impression that Europe is struggling to catch up with China in battery production. Does the European automotive industry even need its own battery production?
In-house battery production is important because the battery is the part of the electric car with the greatest added value. We are talking about around a third of the car price. Meanwhile, batteries have become cheaper and are somewhere between 6,000 and 8,000 euros. But there is still a margin. If that is lost, you have to look at how you can still produce the rest of the vehicle economically.
It is hard to imagine that the German car manufacturers have failed to notice this.
This has actually been ignored in the past. Instead, in the 2010s, they said that batteries are bought-in parts, and a car manufacturer doesn’t need to bother with them. In hindsight, that was a clear misjudgment.
Is it so difficult to build EV batteries?
When a battery manufacturer sets up a new production line, it turns out that many cells are good. Others, however, are faulty or do not have the desired performance. They are then rejected. This is known as the scrap rate.
The scrap rate is what can kill the whole thing. Ultimately, the scrap rate must fall to a low single-digit percentage. All battery manufacturers had to go through this, including the Chinese. They shoveled mud for five years, but they pulled through. They ended up becoming the global market leader.
Couldn’t German companies have done the same?
In the 2010s, we had an entire battery cell production facility at Li-Tec Battery in Kamenz. The company was then partially acquired by Daimler AG (now the Mercedes-Benz Group). There were initial problems there, too. Because the company was only in the black in single figures, Daimler eventually said: It’s not profitable, we’re closing it down. I believe that with a little more time, something great could have been achieved here.
The problem is that they don’t want to take risks and generate short-term profits. But building up the necessary expertise and fine-tuning these tiny adjustments to achieve something close to perfection takes time. That doesn’t happen overnight. If we don’t think more long-term, then others will supply us for everything that is similar in some way.
Is there a realistic chance of Europe catching up in battery production?
A cutthroat price war is currently raging in China. From the outside, the Chinese economy always looks relatively homogeneous. But internally, competition is fierce. This has led to an undercutting race and overproduction.
In some cases, the price of battery cells is now well below 100 US dollars per kilowatt-hour. This has always been regarded as the limit at which an electric car can be cheaper than a gasoline car of the same size. This is actually good news. In China, two-thirds of electric cars are now cheaper than comparable gasoline cars.
However, this makes it harder for Europeans to enter the market. Especially as we have different framework conditions here, such as higher energy prices. Labor costs are also higher, although the latter does not play such a major role. Partly because production is largely automated and because skilled workers in China now also earn quite well.
Do the tariffs imposed by the EU on EVs from China have any effect in this context?
The tariffs can help buy some time. The only question is how to use this time. Do the automotive industry and investors have the perseverance to get through the difficult transition phase? Then, in my view, they could also become competitive. If they remain largely stuck in the gasoline car sector, they will dwindle in this ever-shrinking niche and eventually disappear.
Incidentally, Brussels was already thinking about how to keep up with the Chinese five years ago. I was involved in these deliberations. The result was to focus on green battery cells. In other words, battery cells that meet certain minimum standards in terms of CO2 footprint, composition and the like.
Isn’t Northvolt heading in this direction?
Exactly. The carbon footprint of their battery cell in 2020 was between 120 and 150 kilograms of CO2 per kilowatt-hour. As far as I know, Northvolt is now at 30 or 40 kilograms of CO2 per kilowatt-hour and is expected to reach 10 next year. That means it will no longer take 20,000 or 30,000 kilometers of driving, but perhaps only 2,000 or 3,000 kilometers until the carbon footprint of an electric car is better than that of a gasoline car over its life cycle. That is excellent work.
But now they have stumbled. One reason is that the scrap rate is apparently still comparatively high, which is a typical ramp-up effect. They have to sell their cells at too high a price and are not yet able to deliver reliably. It has simply taken longer. I don’t think Northvolt is really to blame here. The matter is simply complex.
But in the end, BMW withdrew its two-billion-euro order. BMW now sources its battery cells from Chinese and Korean manufacturers, some of which produce in Hungary.
Maximilian Fichtner is Professor of Solid State Chemistry at the University of Ulm and has been Managing Director of the Helmholtz Institute Ulm for Electrochemical Energy Storage since October 2021. He is also spokesperson for the Battery Cluster of Excellence POLiS (Post Lithium Energy Storage). With 20 patent applications and 450 publications, he is considered one of Germany’s leading battery researchers.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.
Fishtail wrinkles (鱼尾 yúwěi “fishtail”; 纹 wén “pattern, grain,” here from 皱纹 zhòuwén “wrinkles”) appeal to some, while others fight them with Botox. Be that as it may: In the Western world, we know the small wrinkles in the eye area with their radial structure colloquially as “crow’s feet,” whereas the Chinese tend to refer to them as “fishtails.”
Want more? Go to www.new-chinese.org
