15 Jun 2020, 14:47
Benjamin Wehrmann

Germany's car industry warns of bankruptcies due to coronavirus and climate policies

The German car sector may face a "series of bankruptcies”, leading industry representatives have warned. This is due to an almost unprecedented drop in demand caused by the worldwide coronavirus pandemic, which is compounded by climate policies to reduce carbon emissions in the transport sector. "The second quarter of 2020 will be the most difficult for us since the end of the Second World War," Elmar Degenhart, head of automotive industry supplier Continental, told news agency dpa in an interview carried by Focus Online (link to short version). Degenhart said many companies will go bust if there is no substantial recovery in the European car market over the summer "in Germany and Europe as well as in many high-income countries around the world." He argued that the decision to exclude vehicles with combustion engines from a purchase premium as part of the German government's coronavirus recovery programme, and only grant it to e-cars and hybrids, is a mistake. "These have a market share of eight percent in Germany. This shows that the effects will be very limited," Degenhart said, adding that a complete switch to electric vehicles will not be possible for the car industry before 2040.

In a similar vein, Hildegard Müller, head of car industry lobby association VDA, said she feared job losses if the government's stimulus programme fails to revive the market, arguing that "modern combustion engines make a significant contribution to climate action." In an interview with newspaper Tagesspiegel, Müller said German carmakers are leaders in electric mobility, with seven of the ten most popular e-car models coming from the country's manufacturers. Nevertheless, "markets trust modern combustion engine cars," Müller said, arguing that neglecting the technology "misjudges the value of industrial production and well-paid jobs" that are a cornerstone of Germany's economic strength.

Jörg Hofmann, head of steelworker union IG Metall, said calls for abandoning the combustion engine will alienate workers in his industry. He particularly criticised the smaller government coalition partner of chancellor Angela Merkel's conservative CDU/CSU alliance, the Social Democrats (SPD), for letting down its traditional voters. "I have some doubts as to whether the SPD has a viable industrial policy concept at all," the SPD-member told Tagesspiegel in a separate interview. "Climate action and employment are not mutually exclusive," he continued, adding that "if the balance is lost here, we risk causing a rift in society with massive unemployment and social upheaval."

The country's poor record on transport emissions reduction over the past 30 years has repeatedly been singled out as a major obstacle to improving its overall climate policy, which is why a sweeping purchase premium for new cars that would include vehicles with modern combustion engines was taken out of the government's major 130 billion euros stimulus programme presented last week. Media commentators have called the decision a "watershed moment", signifying that the "almost unlimited power of the car lobby has been broken."

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