In brief
- Gucci launches $1,000 trainers made in China, showcasing local technological expertise.
- German car exports to China have fallen by 33% in one year.
- Volkswagen has invested $706 million in Chinese manufacturer Xpeng to catch up in the electric vehicle market.
Chinese technical expertise is now shaking up the strongholds of European luxury and the automotive industry. The house of Gucci has taken a historic step by entrusting the production of its new $1,000 “Drip” trainers to a Chinese manufacturer, breaking with a century-old tradition of exclusively Italian manufacturing. This decision reflects a new economic reality: China is no longer merely the world’s factory for low-end products, but a hub of expertise capable of satisfying the demands of the most prestigious brands in the Kering group. Historically, the “Made in Italy” label formed the bedrock of identity for Gucci, which was founded in Florence in 1921. This strategic pivot towards Chinese production for a four-figure item demonstrates a profound paradigm shift in the perception of Asian industrial quality.
The second Chinese shock and moving upmarket
Economists are observing what they describe as a “second Chinese shock”, a phase where exports from Beijing no longer involve cheap clothing, but high value-added goods. China has officially completed its industrial transformation, moving from its status as a component supplier to that of a leading technological competitor. According to analyses, this progression follows the historical model of Japan or South Korea, but with a striking power multiplied by the scale of the domestic Chinese market and an unprecedented speed of execution.
This increase in capability owes much to technology transfers carried out since the 1980s. Companies like Volkswagen trained generations of local suppliers to European quality standards through joint ventures required by local regulations at the time. Today, these partners have acquired sufficient technical autonomy to launch their own brands, benefiting from continuously competitive production costs: the average salary of a Chinese worker stands at $629, compared to over $2,000 in South Korea. This difference in cost structure, coupled with cutting-edge technological expertise, particularly in complex assembly processes and innovative materials, allows China to tackle the luxury and high-tech segments.
In the fashion sector, turning to China for products like the “Drip” trainers is not explained solely by a desire for cost reduction. It is a quest for technical sophistication. The manufacturing of contemporary sports shoes requires machinery and chemical processes (moulding, foam injection, technical fabrics) that Italian artisan workshops, more focused on traditional leather, do not always possess at the same level of industrialisation as factories in Guangdong province or the Shanghai region.
German industry facing the storm
Germany, Europe’s leading economy, is particularly feeling this geographical and technological shift. The German trade deficit with China has increased by a third, while sales from manufacturers like Mercedes-Benz and Porsche are losing momentum on Chinese soil. For decades, China was the main growth driver for German premium brands, absorbing a massive share of their high-end production. The reversal of this trend is abrupt: vehicle exports from across the Rhine to the Middle Kingdom dropped by 33% in the space of a single year.
The shift to electric mobility has neutralized Germany’s historical advantage in the internal combustion engine, shifting the center of gravity for innovation towards batteries and software, fields where Chinese players like BYD or Xpeng excel. Chinese consumers, once fascinated by German mechanical engineering, now favour connectivity, onboard screens, and driver-assistance systems, segments where local manufacturers have taken a considerable lead. An economist at the European Central Bank points out that products exported by China now bear a striking resemblance to those from Germany, creating direct substitution in international markets.
This direct competition forces European giants into massive restructurings to safeguard their profitability. Volkswagen has thus announced a drastic reduction in its workforce and model range, a first in its 90-year history. The Wolfsburg group, a symbol of European industrial power, finds itself forced to rethink its entire production apparatus to face Chinese players whose responsiveness is deemed twice as fast as that of traditional European structures.
Luxury and automotive: intersecting destinies
The situation of Gucci and that of Volkswagen illustrate two sides of the same issue: the loss of Europe’s technological and symbolic exclusivity. For Gucci, the challenge is to maintain an aura of prestige despite a “Made in China” label that could confuse part of the traditional clientele attached to Tuscan craftsmanship. However, for younger generations of consumers, product performance often takes precedence over geographical origin, as long as the brand guarantees aesthetics and social status.
To survive, some experts suggest taking inspiration from the Swiss watchmaking industry. In the 1970s, faced with the arrival of Japanese quartz watches, houses like Omega chose to reposition themselves in the ultra-high-end segment, transforming a utilitarian object into a symbol of mechanical luxury. This strategy of moving towards ultra-luxury aims to make the product incomparable and therefore less exposed to pure technological competition. While this strategy works for niche brands or haute couture houses whose value rests on heritage and rarity, it proves extremely perilous for mass-market car manufacturers that need large sales volumes to amortise research and development investments running into billions of euros.
The era of strategic alliances
As a result, alliances are multiplying and redefining industrial boundaries. Rather than directly opposing a wave they can no longer stem, European companies are integrating Chinese expertise into their own value chain. Volkswagen’s $706 million investment in Xpeng is the most striking example of this transformation: the German manufacturer is literally buying access to a software and electronic architecture that it cannot develop fast enough internally.
This agreement, coupled with Gucci’s use of Chinese manufacturers for its most technical products, outlines the contours of a new global industry where the “Made in China” label is no longer synonymous with a compromise on quality, but with industrial performance. China is no longer merely a offshoring destination to reduce labor costs; it is becoming the nerve centre for the development of complex products. For Europe, the challenge is no longer just to protect its factories, but to preserve its capacity to innovate against a competitor that now commands the entire chain, from raw materials to the software interface.
Further reading
to the European Automobile Manufacturers’ Association
