China sales slow but automotive grows strongly on incentives – BASF CEO

MADRID (ICIS)–BASF’s sales in China slowed overall in the third quarter, as some areas were under lockdowns or coming out of them – but the automotive sector has recovered strongly on the back of government incentives, the German chemicals major’s CEO said on Wednesday.

Martin Brudermuller added that BASF is present in China for the long term, despite 2022’s slowdown, adding that the country already accounts for 50% of the global chemicals market.

The company presented earlier on Wednesday its Q3 results, showing sales growth thanks to higher selling prices but sharp falls in earnings and net income.

“In China, the third quarter was weaker in some respects than we had previously anticipated. Our sales volumes in China decreased around 8%, just slightly above the 7% decrease we saw in the company. We must wait and see how Q4 develops,” said Brudermuller, speaking to reporters from the company’s headquarters in Ludwigshafen.

“Sales and incoming orders in September and the beginning of the fourth quarter are lower than in the same period of 2021.”

However, the petrochemicals-intensive automotive sector recovered strongly during the third quarter, thanks to stimulus applied by the Chinese government, said the CEO, adding BASF was “surprised” to see such an uplift in sales to that industry.

He said growth in China for the coming years could be lower than the medium-term average of 6% but added that GDP growth could still be between 4% and 5% in the coming years.

“These are still enormous figures as China is a large market,” said Brudermuller.

He went on to say that the company “asks the critical questions” in China regarding economic policies, after investors have started to take a back seat, given strict pandemic-control restrictions this year, but added that the country remains key for BASF and the German economy.

BASF is building a large chemicals site, emulating its Ludwigshafen model, in Zhanjiang, Guangdong province.

“If you look at the media coverage about China, they are trying to use every negative opportunity they can find to dwell on that. But we have business relations with China, and it is key for the German economy. We ask critical questions but overall, we took the decision China is a good opportunity for BASF,” he said.

“We have had discussions about our strategy in China with the German government, of course. What I would wish is Germany and the EU have a 360° position: [analyse] when things go wrong, what our dependencies are and what options we have to diversify. We should use our trade potential and take on the opportunities for co-operation with China.”