BMW says diversifying risks does not mean it is leaving China

German automaker BMW Group said that diversifying its supply chains away from China does not mean it is leaving the country completely.

“We always try to diversify our risks. This is not leaving a country or leaving a specific region,” CEO Oliver Zipse told CNBC’s Martin Soong in an exclusive interview.

“Especially the BMW Vision Neue Klasse, it will not be a small volume. So we need large suppliers – we need more than one anyway,” said Zipse, during the Japan Mobility Show 2023. BMW revealed its new electric concept car, Vision Neue Klasse, in September as it looks to take on Tesla.

BMW is not leaving China, he said, adding that free trade is “fundamental to our business model.”

In July, Germany had urged companies to “de-risk” from China, warning that Beijing’s economic strategy aims to make it less dependent on other countries, while making international production chains more dependent on China.

“For Germany, China remains a partner, a competitor, a systemic rival. But the aspect of systemic rivalry has become increasingly prominent in recent years,” Germany’s foreign minister Annalena Baerbock had said at that time.

“This is having an impact on European and global security,” the German foreign ministry said in a 64-page report.

Earlier this month, the European Union launched a probe into subsidies for China-made electric vehicles exported to Europe, following a surge in EU imports of such vehicles from China.

European Commission President Ursula von der Leyen said on Sept. 13 that the “global market is flooded with cheaper electric vehicles” at “artificially low” prices owing to “huge state subsidies.”

“It may result in the Commission levying countervailing tariffs on EU imports of battery EVs from China to offset state subsidies, if substantiated, and to level the playing field,” according to a notice published by the European Commission on Oct. 4.

BMW manufactures cars, including EVs, in China and exports them to Europe. China has become a global manufacturing and export hub for EVs for the likes of BMW and Tesla thanks to the increasing competitiveness of Chinese EVs, cost advantages of production and and large production capacity, said the Center for Strategic & International Studies.

In 2022, the German automaker opened its $2.2 billion factory in Shenyang with a strong focus on producing EVs.

BMW produces the iX3 EV in China and exports them to Europe and will export the electric Mini Cooper starting next year, making it vulnerable to possible EU tariffs on imports from China.

In response to the EU’s probe, Zipse said that BMW is a “global player.”

“We are at home in Europe. We are at home in China. We are at home in the U.S. We, of course, are at home here in Japan even more. So that’s why we are here. And we always foster and speak for free trade worldwide,” said Zipse.

“This ground principle of a working economy and only the free trade can really drive our effects on the climate down – with free trade, with technologies from all over the world, with free access to raw materials, and especially implementing them in all technologies,” said Zipse.

BMW’s CFO Walter Mertl said he did not endorse punitive tariffs, arguing the EU investigation would do more harm for carmakers doing business in China and protect those who do not have significant sales in China, according to a Reuters report.