German auto industry may need more support than given in Covid-19 times

Germany’s struggling auto industry needs more government aid including a purchasing bonus for less-polluting combustion-engine cars to help weather the coronavirus pandemic, according to Transport Minister Andreas Scheuer.

The number of electric vehicles available is limited and there are combustion-engine models on the market that are relatively clean in terms of air pollution, Scheuer said Tuesday in an interview with DLF radio.

“We are talking about a key German technology and many, many jobs and families depend on it," Scheuer said ahead of talks later on Tuesday chaired by Chancellor Angela Merkel between government officials, regional leaders and auto executives on the future of the industry.

Merkel’s ruling coalition is divided over the need for a purchasing incentive for combustion cars, with Scheuer’s party -- the Bavaria-based CSU -- arguing in favor and others insisting that the focus should be on promoting electric vehicles. Merkel last week said that she’s aware of the CSU’s position but sees no need to expand the government’s stimulus package for the time being.

Germany has already sought to lift car sales by introducing purchasing subsidies of as much as 9,000 euros ($10,600) per electric vehicle.

Scheuer, who will attend Tuesday’s “car summit," said more government support is needed to help carmakers and parts suppliers cope with the fallout from the coronavirus pandemic.

The auto industry is mired in its worst crisis in decades just as it faces pressure to invest in new technology as the combustion era draws to a close and car-sharing services gnaw at demand.

Companies including BMW AG and Continental AG have announced job cuts and Volkswagen AG reduced its dividend after losing 2.4 billion euros in the second quarter when the pandemic shuttered factories and showrooms.

German auto sales slumped by a fifth in August, erasing headway made during the previous month and damping hopes for a rapid recovery in Europe’s largest economy. Germany’s VDA car lobby expects a 25% drop in domestic auto production this year after output through July collapsed to the lowest level since 1975.

Long Crisis

“All the aid that we have provided so far, such as wage support and much more, is having a positive effect but this crisis will be with us for a long time," Scheuer said. “When Germany’s car industry is in crisis then that also has an impact on the rest of Europe, also in terms of competitiveness with the U.S. and Asia."

Bavaria Premier Markus Soeder, who heads the CSU and will also take part in Tuesday’s meeting, said it can be debated whether it’s better to provide state subsidies for the industry from a special fund or incentives for individual products.

“But what is clear is that in the end we have do something to support these many jobs in a key part of our manufacturing sector," Soeder said in an interview with ZDF television.