Moritz Schularick, president of the Kiel Institute for the World Economy (IfW), has identified a potential scenario where Chinese automaker BYD could acquire German automotive giant Volkswagen. This assessment follows ongoing structural shifts in the global electric vehicle market, where Chinese manufacturers have gained significant competitive advantages in production costs and software integration.
The Logic Behind a Potential Acquisition
The possibility of a Chinese firm acquiring a legacy European manufacturer is rooted in the shifting economics of the automotive industry. According to Moritz Schularick, the rapid technological advancement of Chinese companies like BYD, combined with the scale of their domestic market, creates a stark contrast to the challenges currently faced by traditional German automakers.
Schularick’s analysis points to a fundamental change in the global hierarchy. While Volkswagen remains one of the world’s largest automotive groups, it has struggled to maintain its market share in China—historically its most profitable region—against a surge of local competitors. The transition to electric vehicles (EVs) has forced legacy firms to invest heavily in new platforms, often struggling with high overhead costs compared to the lean, vertically integrated business models of Chinese rivals.
How BYD Compares to Legacy Manufacturers
BYD’s rise is largely attributed to its internal control of the supply chain, particularly regarding battery production. By manufacturing its own batteries, BYD captures a larger share of the value chain than traditional automakers that rely on third-party suppliers.
| Feature | Legacy European Automakers | BYD (China) |
|---|---|---|
| Supply Chain | Primarily outsourced/complex | Highly vertically integrated |
| Battery Tech | Purchased from partners | In-house production |
| Primary Market | Global/Europe | China/Global Export |
| Cost Structure | High legacy overhead | Optimized for EV scale |
Why This Matters for the European Market
The prospect of a Chinese takeover of a pillar of German industry highlights the broader economic tension between the European Union and China. The European Commission has recently implemented provisional countervailing duties on electric vehicles imported from China, citing unfair state subsidies.
These regulatory measures are designed to protect European manufacturers from a flood of lower-priced imports. However, economists like Schularick suggest that defensive trade policy may not be sufficient if European firms fail to bridge the innovation and cost gap. The suggestion that a firm like BYD could theoretically acquire a company the size of Volkswagen underscores the severity of the competitive threat.
What Happens Next?
There is no indication that a formal bid for Volkswagen is imminent or under consideration by BYD leadership. Current market realities, including strict antitrust regulations and political sensitivity surrounding the automotive sector in Germany, would make such a transaction highly complex.
For Volkswagen, the focus remains on its "performance program," which aims to cut costs by billions of euros to stabilize margins. The company is also accelerating its software development and battery partnerships to regain lost ground. Whether these internal reforms will be enough to maintain independence in an increasingly volatile global market remains the central question for investors and policymakers alike.