The German automotive sector experiences struggles - no remedy in sight.
Sticking to traditional methods, politics, businesses, and unions are attempting to tackle the predicament in the automotive sector. Regardless, the fundamental issue remains unresolved.
Call it a "meeting" now, politicians often convene one to demonstrate that an issue is critical, vital, and requires immediate attention. Although such high-level gatherings typically yield limited results, their popularity continues to grow.
In line with this questionable fashion, the "Automotive Summit" was called by the Federal Minister of Economics, Robert Habeck, for Monday. Attendees included representatives from politics, businesses, and unions. The circumstances of Germany's primary industry warrant concern: Volkswagen contemplates closing facilities, while BMW and Mercedes decrease their earnings predictions and sell far fewer electric vehicles than anticipated. For a government focused on mobility transformation, this predicament transcends mere inconvenience.
Indeed, some possible solutions are suggested. The SPD proposes resurrecting the concept of a scrapping incentive, with Volkswagen also considering this approach. Recognizing market principles, this action would merely serve as a temporary subsidy for manufacturers, failing to make electric cars genuinely cheaper. Mercedes advocates for relaxed CO2 regulations, requiring Brussels approval. And, of course, tax benefits for electric corporate vehicles are under consideration again, which the industry hopes will boost the utilization of battery cars in corporate fleets.
Role model for France?
"Clearly, we need crystal-clear, dependable signals for the market," Habeck concluded after the meeting. This realization, however, arrived late, following the German government's initial introduction and subsequent abandonment of electric car purchase incentives due to the debt ceiling.
Given the present market scene, all the current proposals appear minuscule – disproportionate to the actual situation. The German market carries weight, but its significance pales in comparison to the current challenge – China. For decades, the Chinese have garnered technological knowledge from German car manufacturers through joint ventures, subsequently leading in the increasingly vital IT automobile components. Moreover, they have sustained a significant number of often loss-making electric car manufacturers through financial aid, from which emerging competitors in the United States and Europe pose competition with low prices.
Consequently, all German manufacturers experience substantial market share loss in China, and neither a scrapping incentive nor CO2 amnesty will rectify this. At the time of the automotive summit, Habeck only stated, "I'm not an advocate of tariffs." A diplomatic solution must be found.
Interestingly, one proposal aims to counteract Chinese industrial policy. Volkswagen referenced a French model: incentives are granted only if the vehicle's production emits less than 14.75 tonnes of CO2. This system could strengthen climate protection and possibly impede Chinese competition in Europe.
On the summit day, the U.S. introduced another approach: a complete ban on the sale of specifically advanced Chinese cars equipped with Chinese or Russian software and hardware. The rationale is security concerns. Since the incident with the exploding pagers in Lebanon, it's been evident that electronically controlled devices can be weaponized in other countries. A ban would also serve as a tool in the ongoing U.S.-China trade war, which has intensified in recent months.
Germany or Europe need not adopt such stringent trade policies, as it's foreseeable that such measures will have drawbacks. Nevertheless, the question arises whether the automotive powerhouse is still thinking too narrowly while other major industrial regions, specifically Asia and the U.S., actively take bold steps. In any event, this competition won't be settled with a scrappage incentive.
The proposed French model, where incentives are given only for vehicles with CO2 emissions below 14.75 tonnes, is being considered by Volkswagen as a potential strategy to combat Chinese competition within Europe. Despite the potential drawbacks, the U.S. has introduced a more extreme approach, considering a complete ban on the sale of advanced Chinese cars equipped with Chinese or Russian software and hardware due to security concerns.
In light of these actions from other major industrial regions, the question arises if Germany and Europe are still operating within narrow boundaries in the 'Manufacture of motor vehicles', as they need more ambitious strategies to compete effectively.
