Audi CEO Markus Duesmann flew to China last week to tackle a problem that is indicative of the challenges facing Germany: how to compete with its biggest trading partner on new technology.
The head of the German luxury brand went to visit Audi's Chinese joint venture partners -- China FAW Group Co. and SAIC Motor Corp. -- to discuss ways to sell more electric vehicles in the world's largest car market. The effort is critical not just for the Volkswagen Group unit but also as a test of Germany's ability to navigate threats to its competitiveness.
Germany's vaunted automakers dominated the combustion-engine era, but the transition to electric vehicles puts their standing at the pinnacle of the auto industry at risk.
Audi, Mercedes-Benz and BMW are ramping up their range of battery-powered models in a critical bid to compete with Tesla and upstarts from China, including BYD and Nio.
"The transition to electric vehicles in China is naturally a challenge for us," Duesmann said in an interview at Audi's headquarters in Ingolstadt. "We haven't participated in the growth in the electric vehicle market as much as we wouldd have liked."
The shift to cleaner technologies presents more than one dilemma for Germany. The war in Ukraine exposed the country's reliance on cheap Russian gas for its energy needs, and the shift to renewable power has been slow. There's also raw materials needed for batteries, which mainly come from China.
That means Germany's automakers need to overhaul their product range and their manufacturing system at the same time.
"Energy costs will be decisive for us, for Germany and for Europe," Duesmann said. "Energy costs play an enormous role in the production of a car. The raw material costs play a huge role."
For years, Germany gratefully sold cars, chemicals and machinery to the Asian superpower, but more recently the tables have turned and the trade deficit is growing.
"China was moving very fast before, and then we as a society weren't watching closely for three years and they have kept moving," Duesmann said. "It's like when you're watching a marathon race and you turn away for 30 seconds and then the competition is somewhere else completely when you look back. That's how it is with China."