While the Omicron wave is already in full motion in the rest of the world, there have only been few new infections in Hong Kong. There was even hope that the border to mainland China would soon be reopened and that quarantine regulations in the special administrative region would be eased. Now, however, infections are rising dramatically there as well, as our authors report from Hong Kong. Authorities can no longer keep up with tracing infections. “Zero covid” seems to have failed – making the highly anticipated border opening, which is vital for many business people, more and more unlikely.
The Stellantis Group unites world-renowned car brands such as Jeep, Opel, Peugeot, and Citroën. But China, of all places, the world’s largest car market, is still uncharted territory for the auto giant. None of the group’s brands had a significant market share before the merger, as Christian Domke-Seidel explains. That’s also because the company so far has lacked the necessary funds to establish a larger market presence. But it seems as if Stellantis will now use the billion-dollar momentum of the past fiscal year to become more present in China.
In our third analysis, we take a look at Brussels’ evergreen: the EU supply chain law. After several delays, its official presentation is scheduled for the end of the month. Charlotte Wirth has gathered all available facts. One important aspect is already apparent: the EU supply chain law will not include a ban on imports of products made by forced labor.
We wish you an exciting read!
The roaring starting signal came in the form of Stellantis’ first six-month report for 2021. A profit of €8.6 billion within just six months meant an operating margin of 11.4 percent. Even as the semiconductor crisis intensified, Group CEO Carlos Tavares refused to depart from his target of a ten percent margin for the entire year. The annual figures for 2021 will be published in just over two weeks. But the group is already planning its future using its brimming war chest – including in the important Chinese auto market.
And that is necessary. The group’s stellar profits primarily come from the US, where Chrysler and Jeep generated a whopping 16.1 percent margin in the first half of 2021. Stellantis was formed through the merger of Fiat Chrysler Automobiles and Group PSA and unites 14 brands. These include, in addition to the brands already mentioned, Opel, Peugeot, and Citroën. Ferrari, by the way, is no longer part of the group. Sergio Marchionne, who has since passed away, had to sell off the silverware from the group back in 2015.
The company sold around eight million vehicles before the Covid pandemic. But its success stands on shaky foundations. The group suffers from production overcapacities and unclear positioning of its brands, which makes it hard for customers to distinguish between them. The merger has resulted in far too many engines and platforms. And the Group is years behind in electromobility.
China, of all places, the world’s largest car market, is still uncharted territory for Stellantis. None of the Group’s brands had a significant market share before the merger. This was also because the company lacked the funds to establish a greater market presence. In 2021, Stellantis sold just 100,000 vehicles in the People’s Republic – and even that was already double the previous year’s figure. Only 9,300 of these cars are classified as New Energy Vehicles (NEV).
But it seems that Stellantis is using the billion-dollar momentum of the past fiscal year to bring change. For example, the group has announced plans to acquire a majority stake in the joint venture with GAC (Guangzhou Automotive Group) (China.Table reported). After the Communist Party eased investment regulations, the Group is currently awaiting approval. The goal is to finally gain a foothold in the Chinese market.
To this end, the Group needs electric cars. A partnership with the Chinese battery manufacturer Svolt is to provide the required batteries (China.Table reported). Stellantis has not yet announced its plans for China and EVs, which are to be presented on March 1. But the group wants to acquire 130 GWh of battery capacity by 2025. This would allow just over two million EVs to be equipped with 60 KWh batteries. According to Stellantis’ plans, this figure will rise to 260 GWh by 2030.
Two other partnerships also show where the Group sees its brands in the future. Stellantis is working with Amazon to develop a new infotainment system by 2024. Navigation, shopping, payment transactions, and vehicle maintenance will then be organized via Alexa. By 2030, Stellantis expects software-based services to generate a revenue of €20 billion annually.
The necessary semiconductors are to be ensured by another new partnership with Foxconn (China.Table reported). Together with the Taiwanese contract manufacturer, a networked cockpit and various digital services are to be developed. Foxconn’s supply chain in the area of chips and semiconductors is of particular importance for Stellantis.
It is still unclear which brands Stellantis intends to promote in China. There had been plans to increase Opel’s presence in China. However, Jeep already has a strong image in the People’s Republic. A study by JD Power recently praised the US off-road brand for its reliability, quality, and appeal. Its SUVs are also more likely to meet the tastes of Chinese customers.
The time has finally come. On February 23, the regulation on sustainable corporate governance, also known as the EU Supply Chain Act, is supposed to be presented – almost three years after European Commissioner for Justice Didier Reynders announced the legislation. There have been frequent delays. The European Parliament fears that this has further diluted the law. “It is imperative that the Commission keeps its ambitions high and delivers an efficient law,” demands German Green Party politician Anna Cavazzini, for example. The human rights and environmental due diligence obligation must run through the entire value chain, she said, and small and medium-sized enterprises must be subject to the law, at least in high-risk sectors.
At present, the proposed legislation is still undergoing consultation. However, some key points have already been revealed. For example, the much-discussed import ban on products made by forced labor will not be included in the final draft. The import ban would have mainly affected goods from the Chinese region of Xinjiang. Industry representatives pointed out that identifying forced labor could prove to be particularly difficult there (China.Table reported).
EU Commission President Ursula von der Leyen had announced the import ban last year in her State of the European Union address: “We will propose a ban on products in our market that have been made by forced labor, human rights are not for sale – at any price.” A good five months later, however, it is now evident that the import ban will not become part of the supply chain law, due to an internal dispute within the EU Commission. However, according to information obtained by Europe.Table, Commissioner for Trade Valdis Dombrovskis is currently drafting an initiative for a so-called product withdrawal mechanism, which would allow certain products to be pulled from the market.
The EU Commission will nevertheless argue that the import ban is implicit in the law: After all, the law aims to prevent products manufactured under human rights violations – including forced labor – from entering the European market.
The personal liability of company executives will also not become part of the supply chain law. This is not a surprise. This had been one of the biggest sticking points among the EU commissioners. For a long time, it was unclear whether the Brussels authority would shift the element into a second law. Now it seems clear: It will be dropped altogether.
However, the EU Commission is taking action in other areas: Although the scope of the law is smaller than originally envisaged, the due diligence obligation for affected companies will apply to the entire value chain. Around 10,000 European companies will probably have to adapt to the EU supply chain act. The threshold for companies is to be 500 employees and €150 million in annual sales – which would take the European law further than the German Due Diligence Act. The latter applies to companies with 3,000 or more employees in the first year, and later to companies with 1,000 or more employees. In addition, the due diligence obligation here is limited only to the first stage of the supply chain (“Tier 1”).
Accordingly, Berlin also placed strong pressure on Commission President von der Leyen. In the new federal government, however, the Social Democratic Party (SPD) is now pushing to go one step further at the EU level than the law that was so painstakingly negotiated in the German parliament. Resistance is most likely to be expected from the German Free Democratic Party (FDP). However, the ministries occupied by the Liberals are not even in charge of this matter.
Criticism of the Commission’s plans comes from the machinery and plant engineering sector. “A due diligence law that covers the entire supply chain and has a broad range of applications would place a very significant burden on internationally networked SMEs,” says Holger Kunze, head of the VDMA’s Brussels office. “For many of our member companies, it would no longer be implementable at all.”
The German industry will therefore not be delighted that the EU Commission’s draft envisages liability under civil law. This applies to damages and human rights violations that occur as a result of an inadequately followed due diligence. Civil liability was originally also envisaged in the German counterpart, but former Development Minister Gerd Mueller was forced to back down after receiving pressure from the Minister for Economic Affairs and industry associations. However, this week, around 100 European companies and investors, including German ones, campaigned for an EU law that would include a liability provision for affected parties.
In addition to companies with 500 or more employees, due diligence will also apply to high-risk sectors. This is likely to affect companies with 250 or more employees; according to informed circles, the Commission has not yet made a final decision. The exact definition of high-risk sectors is also unclear. The EU Parliament requested in a report that the EU Commission define these sectors.
A legal opinion by the German Supply Chain Law Initiative (Initiative Lieferkettengesetz), which has listed such sectors, gives an idea of which sectors pose a high risk. It lists 16 high-risk sectors, including automotive, chemicals, ITC, mining, and defense.
Instead of liability for company executives, the law will include a significantly toned-down supervisory obligation. This means that if deficiencies or problems are identified in the supply chain, the board of directors is to sign off on a plan to remedy them. In addition, the EU supply chain law provides for administrative sanctions for companies, but also its executives, if they do not comply with the liability obligation. However, Brussels is passing responsibility to member states here: They are supposed to determine which authorities have jurisdiction and the extent of penalties.
The Commission has taken a similar approach with the Conflict Minerals Regulation, which is already in effect. The differences between member states are enormous. Fines range from €50,000 in Germany to €726 in Austria. In Luxembourg, the parliament has still not passed the framework law on which penalties could be imposed in the first place.
Wednesday was not a good Olympic day for the host. There were no new medals, not even in the top discipline short track. For Germany, on the other hand, it was a day with plenty of precious metal: one gold in Nordic combined and gold and silver in doubles luge. This means that Germany leads the medal table on Wednesday evening, while China fell back to rank five. On Tuesday, both had still been together in third place. Instead of great victories, China’s athletes were the subject of irritating and curious stories.
The fact that she feels part of both Europe and Asia at the same time is actually something of a competitive edge, says Shada Islam. You are simply taken more seriously by both sides if you can show that you are at home in both cultures. Islam considers it a “lucky coincidence” that her father was sent as a senior Pakistani diplomat to Brussels when she was young and that she became an “accidental European” as a result. She pursues her goal of strengthening the dialogue between Europe and Asia as a journalist, think-tanker, and academic.
She began her journalistic career at Agence Europe before Far Eastern Economic Review swiftly poached her to spend two decades as head of EU correspondence. During that time, she strived to enrich the EU’s public relations, which was somewhat on the back burner at the time, with reporting and analysis aimed at East and Southeast Asian audiences. Since China was still considered a developing country in Europe in those days and accordingly received little attention, she had to do “pioneering work”. Because in order to explain what impact Asia has to expect from events in Brussels, she first had to understand the expectations the Far East had of Europe, as she explains.
Her accumulated expertise quickly becomes apparent. Barely speaking about current migration policy, she casually mentions that the phrase “Fortress Europe” dates back to when the EU was moving toward a single market in the early 1990s. The fear in Asia was that the European economy would turn inward and leave the rest of the world out in blind protectionism. That this would not happen was already foreseeable at the time, Islam said. But that it actually appeared that way was due to “careless communication on the part of the EU.”
She has over ten years of experience in senior positions at the European Policy Center and Friends of Europe, where she has developed business areas for Asia, migration, and integration. Through her work in this role and her conversations with numerous premiers and ministers, she has come to believe that the often feared return to a bipolar world will not happen. “What will happen instead is that countries will pick and choose what they need the U.S. for, and where China is interesting to them.”
It is obvious that China no longer wants to be fobbed off as a “junior partner” in this regard. However, it was rather surprising and a nuisance for the Chinese when, after Donald Trump’s chaotic term in office, US Secretary of State Antony Blinken appeared on the scene, whose rhetoric continues to lay claim to global leadership by the West. The EU, on the other hand, is less out of touch with the times and sees China as a partner, competitor, and rival. Islam says, however, that this is not a unique characteristic of the relationship between the EU and China. The same three attributes could also be applied to the United Kingdom, for example. Understanding that the world is big enough to accommodate all these independent actors is the way forward, Islam believes. Julius Schwarzwälder
The mascot of the Winter Olympics has turned out to be a real bestseller in China. Shoppers are lining up for hours in Beijing despite freezing night temperatures to get their hands on a stuffed plush version of the chubby panda in a snowsuit named Bing Dwen Dwen. Those who don’t want to wait in line have to pay a hefty price: Online prices for the stuffed animal have risen steeply – the stuffed animal is sold online for more than $500. Even Beijing police have now issued a public warning against buying the mascot from bootleggers. On Wednesday, three people were reportedly punished for usury in the Bing-Dwen-Dwen trade after a raid.
While the Omicron wave is already in full motion in the rest of the world, there have only been few new infections in Hong Kong. There was even hope that the border to mainland China would soon be reopened and that quarantine regulations in the special administrative region would be eased. Now, however, infections are rising dramatically there as well, as our authors report from Hong Kong. Authorities can no longer keep up with tracing infections. “Zero covid” seems to have failed – making the highly anticipated border opening, which is vital for many business people, more and more unlikely.
The Stellantis Group unites world-renowned car brands such as Jeep, Opel, Peugeot, and Citroën. But China, of all places, the world’s largest car market, is still uncharted territory for the auto giant. None of the group’s brands had a significant market share before the merger, as Christian Domke-Seidel explains. That’s also because the company so far has lacked the necessary funds to establish a larger market presence. But it seems as if Stellantis will now use the billion-dollar momentum of the past fiscal year to become more present in China.
In our third analysis, we take a look at Brussels’ evergreen: the EU supply chain law. After several delays, its official presentation is scheduled for the end of the month. Charlotte Wirth has gathered all available facts. One important aspect is already apparent: the EU supply chain law will not include a ban on imports of products made by forced labor.
We wish you an exciting read!
The roaring starting signal came in the form of Stellantis’ first six-month report for 2021. A profit of €8.6 billion within just six months meant an operating margin of 11.4 percent. Even as the semiconductor crisis intensified, Group CEO Carlos Tavares refused to depart from his target of a ten percent margin for the entire year. The annual figures for 2021 will be published in just over two weeks. But the group is already planning its future using its brimming war chest – including in the important Chinese auto market.
And that is necessary. The group’s stellar profits primarily come from the US, where Chrysler and Jeep generated a whopping 16.1 percent margin in the first half of 2021. Stellantis was formed through the merger of Fiat Chrysler Automobiles and Group PSA and unites 14 brands. These include, in addition to the brands already mentioned, Opel, Peugeot, and Citroën. Ferrari, by the way, is no longer part of the group. Sergio Marchionne, who has since passed away, had to sell off the silverware from the group back in 2015.
The company sold around eight million vehicles before the Covid pandemic. But its success stands on shaky foundations. The group suffers from production overcapacities and unclear positioning of its brands, which makes it hard for customers to distinguish between them. The merger has resulted in far too many engines and platforms. And the Group is years behind in electromobility.
China, of all places, the world’s largest car market, is still uncharted territory for Stellantis. None of the Group’s brands had a significant market share before the merger. This was also because the company lacked the funds to establish a greater market presence. In 2021, Stellantis sold just 100,000 vehicles in the People’s Republic – and even that was already double the previous year’s figure. Only 9,300 of these cars are classified as New Energy Vehicles (NEV).
But it seems that Stellantis is using the billion-dollar momentum of the past fiscal year to bring change. For example, the group has announced plans to acquire a majority stake in the joint venture with GAC (Guangzhou Automotive Group) (China.Table reported). After the Communist Party eased investment regulations, the Group is currently awaiting approval. The goal is to finally gain a foothold in the Chinese market.
To this end, the Group needs electric cars. A partnership with the Chinese battery manufacturer Svolt is to provide the required batteries (China.Table reported). Stellantis has not yet announced its plans for China and EVs, which are to be presented on March 1. But the group wants to acquire 130 GWh of battery capacity by 2025. This would allow just over two million EVs to be equipped with 60 KWh batteries. According to Stellantis’ plans, this figure will rise to 260 GWh by 2030.
Two other partnerships also show where the Group sees its brands in the future. Stellantis is working with Amazon to develop a new infotainment system by 2024. Navigation, shopping, payment transactions, and vehicle maintenance will then be organized via Alexa. By 2030, Stellantis expects software-based services to generate a revenue of €20 billion annually.
The necessary semiconductors are to be ensured by another new partnership with Foxconn (China.Table reported). Together with the Taiwanese contract manufacturer, a networked cockpit and various digital services are to be developed. Foxconn’s supply chain in the area of chips and semiconductors is of particular importance for Stellantis.
It is still unclear which brands Stellantis intends to promote in China. There had been plans to increase Opel’s presence in China. However, Jeep already has a strong image in the People’s Republic. A study by JD Power recently praised the US off-road brand for its reliability, quality, and appeal. Its SUVs are also more likely to meet the tastes of Chinese customers.
The time has finally come. On February 23, the regulation on sustainable corporate governance, also known as the EU Supply Chain Act, is supposed to be presented – almost three years after European Commissioner for Justice Didier Reynders announced the legislation. There have been frequent delays. The European Parliament fears that this has further diluted the law. “It is imperative that the Commission keeps its ambitions high and delivers an efficient law,” demands German Green Party politician Anna Cavazzini, for example. The human rights and environmental due diligence obligation must run through the entire value chain, she said, and small and medium-sized enterprises must be subject to the law, at least in high-risk sectors.
At present, the proposed legislation is still undergoing consultation. However, some key points have already been revealed. For example, the much-discussed import ban on products made by forced labor will not be included in the final draft. The import ban would have mainly affected goods from the Chinese region of Xinjiang. Industry representatives pointed out that identifying forced labor could prove to be particularly difficult there (China.Table reported).
EU Commission President Ursula von der Leyen had announced the import ban last year in her State of the European Union address: “We will propose a ban on products in our market that have been made by forced labor, human rights are not for sale – at any price.” A good five months later, however, it is now evident that the import ban will not become part of the supply chain law, due to an internal dispute within the EU Commission. However, according to information obtained by Europe.Table, Commissioner for Trade Valdis Dombrovskis is currently drafting an initiative for a so-called product withdrawal mechanism, which would allow certain products to be pulled from the market.
The EU Commission will nevertheless argue that the import ban is implicit in the law: After all, the law aims to prevent products manufactured under human rights violations – including forced labor – from entering the European market.
The personal liability of company executives will also not become part of the supply chain law. This is not a surprise. This had been one of the biggest sticking points among the EU commissioners. For a long time, it was unclear whether the Brussels authority would shift the element into a second law. Now it seems clear: It will be dropped altogether.
However, the EU Commission is taking action in other areas: Although the scope of the law is smaller than originally envisaged, the due diligence obligation for affected companies will apply to the entire value chain. Around 10,000 European companies will probably have to adapt to the EU supply chain act. The threshold for companies is to be 500 employees and €150 million in annual sales – which would take the European law further than the German Due Diligence Act. The latter applies to companies with 3,000 or more employees in the first year, and later to companies with 1,000 or more employees. In addition, the due diligence obligation here is limited only to the first stage of the supply chain (“Tier 1”).
Accordingly, Berlin also placed strong pressure on Commission President von der Leyen. In the new federal government, however, the Social Democratic Party (SPD) is now pushing to go one step further at the EU level than the law that was so painstakingly negotiated in the German parliament. Resistance is most likely to be expected from the German Free Democratic Party (FDP). However, the ministries occupied by the Liberals are not even in charge of this matter.
Criticism of the Commission’s plans comes from the machinery and plant engineering sector. “A due diligence law that covers the entire supply chain and has a broad range of applications would place a very significant burden on internationally networked SMEs,” says Holger Kunze, head of the VDMA’s Brussels office. “For many of our member companies, it would no longer be implementable at all.”
The German industry will therefore not be delighted that the EU Commission’s draft envisages liability under civil law. This applies to damages and human rights violations that occur as a result of an inadequately followed due diligence. Civil liability was originally also envisaged in the German counterpart, but former Development Minister Gerd Mueller was forced to back down after receiving pressure from the Minister for Economic Affairs and industry associations. However, this week, around 100 European companies and investors, including German ones, campaigned for an EU law that would include a liability provision for affected parties.
In addition to companies with 500 or more employees, due diligence will also apply to high-risk sectors. This is likely to affect companies with 250 or more employees; according to informed circles, the Commission has not yet made a final decision. The exact definition of high-risk sectors is also unclear. The EU Parliament requested in a report that the EU Commission define these sectors.
A legal opinion by the German Supply Chain Law Initiative (Initiative Lieferkettengesetz), which has listed such sectors, gives an idea of which sectors pose a high risk. It lists 16 high-risk sectors, including automotive, chemicals, ITC, mining, and defense.
Instead of liability for company executives, the law will include a significantly toned-down supervisory obligation. This means that if deficiencies or problems are identified in the supply chain, the board of directors is to sign off on a plan to remedy them. In addition, the EU supply chain law provides for administrative sanctions for companies, but also its executives, if they do not comply with the liability obligation. However, Brussels is passing responsibility to member states here: They are supposed to determine which authorities have jurisdiction and the extent of penalties.
The Commission has taken a similar approach with the Conflict Minerals Regulation, which is already in effect. The differences between member states are enormous. Fines range from €50,000 in Germany to €726 in Austria. In Luxembourg, the parliament has still not passed the framework law on which penalties could be imposed in the first place.
Wednesday was not a good Olympic day for the host. There were no new medals, not even in the top discipline short track. For Germany, on the other hand, it was a day with plenty of precious metal: one gold in Nordic combined and gold and silver in doubles luge. This means that Germany leads the medal table on Wednesday evening, while China fell back to rank five. On Tuesday, both had still been together in third place. Instead of great victories, China’s athletes were the subject of irritating and curious stories.
The fact that she feels part of both Europe and Asia at the same time is actually something of a competitive edge, says Shada Islam. You are simply taken more seriously by both sides if you can show that you are at home in both cultures. Islam considers it a “lucky coincidence” that her father was sent as a senior Pakistani diplomat to Brussels when she was young and that she became an “accidental European” as a result. She pursues her goal of strengthening the dialogue between Europe and Asia as a journalist, think-tanker, and academic.
She began her journalistic career at Agence Europe before Far Eastern Economic Review swiftly poached her to spend two decades as head of EU correspondence. During that time, she strived to enrich the EU’s public relations, which was somewhat on the back burner at the time, with reporting and analysis aimed at East and Southeast Asian audiences. Since China was still considered a developing country in Europe in those days and accordingly received little attention, she had to do “pioneering work”. Because in order to explain what impact Asia has to expect from events in Brussels, she first had to understand the expectations the Far East had of Europe, as she explains.
Her accumulated expertise quickly becomes apparent. Barely speaking about current migration policy, she casually mentions that the phrase “Fortress Europe” dates back to when the EU was moving toward a single market in the early 1990s. The fear in Asia was that the European economy would turn inward and leave the rest of the world out in blind protectionism. That this would not happen was already foreseeable at the time, Islam said. But that it actually appeared that way was due to “careless communication on the part of the EU.”
She has over ten years of experience in senior positions at the European Policy Center and Friends of Europe, where she has developed business areas for Asia, migration, and integration. Through her work in this role and her conversations with numerous premiers and ministers, she has come to believe that the often feared return to a bipolar world will not happen. “What will happen instead is that countries will pick and choose what they need the U.S. for, and where China is interesting to them.”
It is obvious that China no longer wants to be fobbed off as a “junior partner” in this regard. However, it was rather surprising and a nuisance for the Chinese when, after Donald Trump’s chaotic term in office, US Secretary of State Antony Blinken appeared on the scene, whose rhetoric continues to lay claim to global leadership by the West. The EU, on the other hand, is less out of touch with the times and sees China as a partner, competitor, and rival. Islam says, however, that this is not a unique characteristic of the relationship between the EU and China. The same three attributes could also be applied to the United Kingdom, for example. Understanding that the world is big enough to accommodate all these independent actors is the way forward, Islam believes. Julius Schwarzwälder
The mascot of the Winter Olympics has turned out to be a real bestseller in China. Shoppers are lining up for hours in Beijing despite freezing night temperatures to get their hands on a stuffed plush version of the chubby panda in a snowsuit named Bing Dwen Dwen. Those who don’t want to wait in line have to pay a hefty price: Online prices for the stuffed animal have risen steeply – the stuffed animal is sold online for more than $500. Even Beijing police have now issued a public warning against buying the mascot from bootleggers. On Wednesday, three people were reportedly punished for usury in the Bing-Dwen-Dwen trade after a raid.
