German multinational engineering firm Bosch announced in January that it will invest roughly $1bn to expand its Chinese operations, as foreign firms develop local research and development (R&D) bases to dodge increasingly stringent technology export regulations in their home markets.
On January 12, Bosch announced it will set up an R&D and manufacturing base for new energy vehicles core components and automated driving in Suzhou Industrial Park, in the province of Jiangsu. The new base will focus on electrified drive products using technology such as silicon carbide power modules.
Yudong Chen, president of Bosch China, said in a statement on January 12 that the new R&D and manufacturing base in Suzhou is “another important milestone for Bosch in China”, as it “will further enhance Bosch’s local R&D and manufacturing capabilities in electrified and intelligent mobility”.
“By further expanding our presence in China, we will be able to better respond to the fast-changing and sophisticated local market demand,” he continued. “Bosch remains committed to its ‘local for local’ development strategy to deepen our roots in the local market, and support China’s move towards future electrified and intelligent mobility.”
China has historically been the biggest market for electric vehicles (EVs), overtaking the US as the world’s biggest auto market as a whole in 2010 — after which the Chinese government offered subsidies for manufacturers of ‘new energy vehicles’, which expired at the end of 2022.
In 2022, the Chinese government scrapped restrictions on foreign ownership of car manufacturing in the country. Until then, the only foreign firm to have full ownership of its operations in China was US EV giant Tesla.
Chinese domestic EV companies, such as BYD and Nio, continue to dominate the market, representing roughly 80% of EV sales in China, according to figures from China Association of Automotive Manufacturers. Now, with the protectionist risks over the use and export of technology, the need for foreign firms to invest in R&D in China has increased considerably.
Since 2016, foreign investment in the R&D segment of EVs in China has been rising steadily reaching a peak of seven projects in 2021, according to fDi Markets.
More competition, more investment
“Foreign original equipment manufacturers and suppliers need to make stronger commitments to China, or have closer ties to the Chinese ecosystem to reverse the trend of dominance of Chinese domestic players in the market,” says Raymond Tsang, auto expert at consultancy firm Bain.
He adds that “multinationals are in evaluation mode”, either to step up their investments or to start unwinding their investments. On balance, he expects there to be more upstream R&D investments from foreign firms in the future in both electric and autonomous vehicles.
The latest investment announcement from Bosch follows similar moves by German automakers, such as Volkswagen and Mercedes-Benz, to invest in local R&D. Volkswagen’s software subsidiary Cariad announced it will take a 60% stake in an autonomous driving joint venture with Beijing-based Horizon Robotics, while Mercedes-Benz is set to invest Rmb1.1bn ($163.4m) in a China tech centre in Beijing.
Gregor Sebastian, analyst at the Mercator Institute for China Studies, wrote in a recent report that while German carmakers used to undertake only “minimal research” in China for fear of technology leakage, now their “greater worry is to fall further behind Chinese competitors”.
Bosch’s chairman, Stefan Hartung, said in the investment statement: “China is the world’s largest auto market, full of promise and vitality. As a multinational enterprise, we need to make full use of the country’s local R&D capability and production capacity.”
Bosch has invested more capital expenditure in greenfield projects in China than any other country worldwide, according to fDi Markets, and has had a presence in Suzhou since 1999.
This article first appeared in the February/March 2023 print edition of fDi Intelligence. View a digital edition of the magazine here.