Mercedes-Benz puts forward China pragmatist to chair supervisory board

Mercedes-Benz has proposed the chief of chemical group BASF as the next chair of its supervisory board, choosing an executive widely regarded as a China pragmatist.

The German carmaker has put forward Martin Brudermüller, the former head of BASF’s China business who last year warned against “China bashing”. Brudermüller knows the car industry well with the chemical group being an important supplier of paints and plastics. He is expected to start his new role when he steps down from the helm of the chemical group next year.

Under the German system, there are two boards: the executive board that runs the company day-to-day and the supervisory board that oversees the work of the former and advises on strategy.

Brudermüller has been criticised by some investors for his decision to build a €10bn chemical factory in China amid increasing geopolitical tension. Mercedes’ decision to hire Brudermüller comes a few days after its chief executive Ola Källenius said it would be “unthinkable for almost all of German industry” to cut ties with China. The company sells more than a third of its cars in the country.

About a fifth of the company is owned by Chinese carmakers Geely and state-owned BAIC, which have acquired stakes in German carmakers in recent years.

“The appointment of Brudermüller might be a compromise, it might be a chair that [the Chinese shareholders] are supporting because he knows China very well,” said Daniel Schwarz, an analyst at Stifel.

He said that China was strategically important for the carmakers as the “transition towards electric and autonomous cars is clearly faster in China than other regions”, adding that US and European industry might very well find itself having to follow Chinese technological advancements.

The announcement comes as Berlin is increasingly concerned about German industry’s reliance on China, amid Beijing’s growing tensions with the west.

Germany is still reeling from having to cut its ties with Russia after the war in Ukraine, with companies writing off their investments linked to the country. BASF is among the companies to have suffered the most from big bets on Russia and reported a €6.5bn writedown of its Russian assets a few months ago.

Mercedes’ German rivals Volkswagen and BMW on Thursday announced results for the first quarter, beating analysts’ expectations with strong sales.

Schwarz said all three of the big German car companies had built up stock from when supply chain issues left many cars standing unfinished, which would leave them more vulnerable to price pressures in the second half of the year.

In China, prices have come under pressure as leaders in the electric segment, such as BYD and Tesla, have been lowering prices to boost market share.

Mercedes has since 2019 been betting on the premium end of the market, which Schwarz said had moved the German group further away from rivalry with Tesla and BYD. “That doesn’t make them immune [to price pressure] but leaves them at less risk,” he said.