Germany and the End of Globalization: Prosperity Under Pressure

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“No,” says Buchholz. Even in the unlikely event that all known projects were to deliver at 100 percent, it still wouldn’t be enough to cover Europe’s needs, he says. For example, Buchholz says that lithium is “hot” right now. But Europe is unable to supply more than 25 percent of the overall need here. He says it’s impossible to cover demand without South America and Australia. The situation is similar with other raw materials used in batteries. Buchholz believes it to be “unlikely” that the company will one day be able to supply itself from its own supplies.

Especially because it isn’t strictly necessary. He says there are enough mineral resources worldwide for the ramp-up of electro-mobility and the restructuring of the energy supply. Securing access is more important, he argues, with direct stakes in mining projects, for example. Buchholz argues that there is no need for panic. “So far, German companies have fared quite well with globalization, despite the growing country risks.”

But that is hardly reassuring in Wolfsburg, where Volkswagen in headquartered, because raw materials are by no means the only dependency risk facing the automotive industry. Few other industries have undergone as much fundamental globalization in recent decades. Turning that back seems almost impossible.

At the very least, though, Diess wants to try to strengthen Europe as a business center. Following the Russian invasion, VW had to shut down production in Germany for weeks because the company had until then sourced most of its wiring harnesses, the car’s central nervous system, from Ukraine. What if Beijing now also attacked Taiwan and supplies of battery cells from China and microchips from Taiwan suddenly dried up? VW would then have to virtually shut down. Although Diess doesn’t believe that such a scenario is realistic, the VW group is nonetheless bracing for further supply chain crises.

The Wolfsburg-based company is examining how and where supply chains and production processes can be relocated to other countries or provided with double backup options.

Particularly when it comes to the battery, the heart of the electric car, the Germans have been striving for greater independence for some time now. Volkswagen is investing several billion euros in six European battery plants. And even that is only enough to cover 20 percent of the demand. The other 80 percent will still have to come from global suppliers.

Generally, former innovation leaders like VW have long been dependent on foreign high-tech giants. Chips, software and artificial intelligence for autonomous driving are created in Taiwan, Tel Aviv, California or Shanghai, not in places like VW headquarters in Wolfsburg or Audi in Ingolstadt. “If Europe loses data sovereignty in the car,” warns CEO Diess, “we will make ourselves completely dependent on high-tech corporations from the U.S. or China.”

But the struggle for greater technological autonomy isn’t yet going as planned for the Germans. VW, for example, wants to grow its software subsidiary Cariad to become Europe’s second-largest software company after SAP, as a bulwark against the competition from the United States and the Far East. It’s a multibillion-euro project. But the company’s new operating system has suffered numerous delays. The consequence is that important new vehicles from Audi and Porsche – vehicles intended as competition for Tesla – are years behind schedule.

The VW CEO also thinks that the fact that the companies are based in Germany is part of the problem – the country is simply too weak when it comes to future-oriented technologies like AI or semiconductors. Diess fears that Europe is overestimating its abilities.

Shanghai: Breaking Away from the West

For a moment, it seemed as if the way back to the old, better world was possible again. After long, dark weeks, the doors opened on Nanjing Road, Shanghai’s five-kilometer-long shopping mall, at the end of May. The Adidas store is reopening, the local media reported.

The sporting apparel manufacturer recently got a taste of what it feels like when Beijing loses its taste for you. In the past quarter alone, sales slumped by one-third compared with the previous year. China used to be Adidas’ most important market, but now it ranks only third. Hopes that this will change are pretty low at this point, despite the reopening of Nanjing Road.

Adidas and other global corporations have been suffering for months from a phenomenon the Chinese call “guochao.” National pride as the basis for consumption decisions. The days in which Western brands were welcomed with open arms appear to have passed.

That’s bad news for the German economy. With a trade volume of 245 billion euros, China is indisputably Germany’s largest business partner.

And yet there is growing mutual antipathy. International workers are leaving the country in droves. German companies are having trouble finding European executives who want to work in China. Surveys conducted by chambers of commerce representing the European Union, the United States, Germany and France show that more than three-quarters of the companies polled now consider China to be a less attractive place to invest.

On the surface, the exodus appears to be a product of the country’s radical “zero-COVID” strategy. The prospects of ever-new lockdowns and not being allowed to leave home for weeks at a time has discouraged international workers. At the same time, the pandemic is merely a catalyst that is accelerating processes that Western companies and their workforces have been feeling for quite some time.

Under President Xi Jinping, the country has begun sealing itself off from the world. Urban dwellers in China may use the latest iPhone, eat Australian steak, watch James Bond movies and listen to Rihanna as a matter of course. They also know what is going on around the world, although that information is always filtered through the state-controlled media cosmos.

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