China auto suppliers and EV makers flood major trade fair in Germany

By Victoria Waldersee

FRANKFURT (Reuters) - Nearly 900 Chinese auto suppliers and a handful of EV makers are showcasing their products at a trade fair in Frankfurt as the country's car sector defies looming trading barriers to expand its global footprint and counter eroding profitability at home.

Chinese carmakers including BYD, Geely, Hongqi and GAC International were set to display their vehicles at the fair, called Automechanika, as an added feature to the event which normally focuses on suppliers.

The country's auto sector is investing heavily in overseas expansion even as Europe and North America erect trade barriers to stem the inflow of China-made EVs they say benefit from unfair subsidies.

The so-called "EV Expo", which opens on Tuesday, was set up in partnership with the China Council for the Promotion of International Trade, an added feature to the event normally focused on suppliers.

"We want EVs made by Chinese carmakers which are currently to some extent unknown to gain trust in the industry," Olaf Musshoff, Automechanika's director, said in a press conference.

China's auto sector's share of China's total outbound investments rose from 16% in 2018 to 22% in 2023, according to a Moody's analysis, and car exports have reached record highs this year.

The large showing of Chinese suppliers - almost double the number of German suppliers in attendance - highlights their growing role in the global supply chain, with Chinese carmakers increasingly planning local production in Europe and elsewhere to circumvent trade tariffs limiting imports.

A PwC study released this month warned that dwindling availability of equity was making it harder for suppliers in Germany to invest in innovative technologies, bogged down by a focus on cost efficiency.

Chinese companies - often with state backing - were more likely to spend on improving batteries and software, the study said, winning market share from German and Japanese firms.

Still, the size and scope of Automechanika Frankfurt - with 4,200 companies attending from over 170 countries - demonstrated Europe was still central to promoting innovation in the sector, said Frank Schlehuber of Europe's supplier association CLEPA.

"Frankfurt is still the centre of gravity," he said.

(Reporting by Victoria Waldersee; Editing by Alison Williams)