Being the world’s largest and fastest-growing market, it’s natural that the daily news flow from China dominates globally. However, the news that Mercedes has abandoned the Chinese EV market is significant.
It was revealed on Tuesday, on a Chinese data website, that Mercedes-Benz Group had sold its remaining 10% stake in premium EV and hybrid maker Denza to BYD, following disappointing local sales.
BYD increased its holding in Denza from 50% to 90% in 2022. This gives BYD a separate brand at the top of what China calls its NEV sector (New Energy Vehicles), which includes both battery-powered and plug-in hybrid (PHEV) vehicles, the latter now being the faster-selling of the two types of EVs.
Mercedes’ departure adds to the gloom foreign carmakers are experiencing in China. Honda has reduced its capacity for producing ICE (Internal Combustion Engine) vehicles in favour of more EV capacity (PHEVs), even though it has not been a standout success in this sector.
Toyota has also performed poorly, as it primarily offers regenerative hybrid-powered cars instead of PHEVs, in which BYD is the leader. VW, BMW, and Porsche have similarly struggled in China.
It remains to be seen how the exit of Mercedes from the EV sector, along with the weak performance of other German carmakers, will affect the situation on September 25 when the EU decides on the final tariff levels for Chinese EV imports. European car industry analysts suggest that it may encourage the EU to impose higher tariffs.
China used to be a significant market for German carmakers, known for their prestigious and glossy vehicles. However, the property market crunch, weak demand recovery since COVID, and the ongoing price war among Chinese manufacturers have hurt all foreign companies, perhaps with the exception of Tesla, although Tesla does not appear interested in further expanding its presence in China.
Denza was established by BYD and Mercedes in 2010 with the goal of creating a leading premium brand of EV and hybrid vehicles. Initially, both companies held a 50% stake, but Mercedes later reduced its share to 10%.
“Denza has officially entered a new era, now fully owned by BYD,” BYD announced on Tuesday. From January to August this year, Denza sold 79,894 units, with the D9 model contributing 71,342 units, or 89% of the total.
BYD has signalled its commitment to Denza, which has sold more than 200,000 units of its D9 model since Mercedes first reduced its stake in the venture. Denza’s new four-door EV and hybrid coupe, the Z9 GT, is scheduled for launch on September 20. Denza PHEV cars are equipped with BYD’s latest long-range plug-in hybrid technology, which reportedly has a range of more than 1,000 kilometres.