Automobiles and Components

German auto suppliers asked to form JVs in China

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Three German car parts suppliers have been told by China they can no longer manage their Chinese units independently but need to form partnerships with local peers, the chief executive of auto parts maker ElringKlinger told a German paper.

"The Chinese state has told several (German car) suppliers that they are no longer allowed to operate their Chinese subsidiaries on their own but only as part of a joint venture in the future," Stefan Wolf was quoted as saying by the Stuttgarter Zeitung.

He said he knew of three companies that now needed to look for a Chinese partner, but did not say which, adding ElringKlinger was not affected.

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"If that were to happen, it would be an attack on intellectual property. 50 percent of the company is being taken away - this, effectively, is expropriation," Wolf said.

"I believe this is an attempt to make up leeway in terms of know how and innovation."

Robert Bosch and Continental, Germany's two biggest automotive suppliers, could not immediately be reached for comment.

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Earlier this month, the European Union Chamber of Commerce in China expressed concern over a recent series of antitrust investigations, saying China, the world's largest car market, was using strong-arm tactics and appeared to be unfairly targeting foreign firms.

At the time, the chamber said it had "received numerous alarming anecdotal accounts from a number of sectors that administrative intimidation tactics are being used to impel companies to accept punishments and remedies without full hearings."

The auto sector has been put under scrutiny from China's National Development and Reform Commission (NDRC), which has investigated car companies amid accusations by state media that global car makers are overcharging consumers.

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"The Chinese state is noticing that 50 percent of the automotive world is taking place in China and that its manufacturers are not benefiting accordingly," ElringKlinger's Wolf told the paper.

European car brands including Volkswagen AG's Audi, BMW and Mercedes-Benz are scrambling to lower prices for new cars and spare parts in an effort to appease Chinese regulators who have accused some of them of anti-competitive behavior.

European and U.S. manufacturers are eager to increase their footprint in China, now the world's largest car market, but have been limited to owning 50 percent or less of joint venture companies run together with Chinese state-owned enterprises.