Volkswagen, Mercedes-Benz & BMW face trouble due to weak Chinese demand

The German government on Monday hosted crisis talks with senior figures from the country's beleaguered auto industry, with Volkswagen reportedly calling for subsidies to boost slumping electric car demand.

Germany's flagship auto sector is battling challenges on several fronts, from high manufacturing costs to a troubled transition to electric cars and weakening demand in key market China.

Among the hardest hit has been Volkswagen, which announced earlier this month that it urgently needed to cut costs and was considering the closure of some German plants for the first time in its 87-year history.

Ahead of the talks, Volkswagen CEO Oliver Blume said it was a chance to push through rapid help for the industry.

"We have major challenges... Perhaps the biggest in the country at the moment," he told news channel NTV.

"It is important to exchange ideas, to examine which levers can be used in the short, medium and long term and then to make bold decisions," Blume said.

The virtual meeting hosted by Economy Minister Robert Habeck included representatives from the top carmakers, the VDA auto industry association, major suppliers and trade unions.

Among the suggestions put forward was reportedly the reintroduction of subsidies for electric vehicles, which were phased out last year, leading to large falls in EV sales.

The Spiegel news outlet reported that VW was calling for the government to offer a 4,000-euro ($4,450) subsidy for the purchase of a pure electric car if the manufacturer also offered a discount of 2,000 euros.

Speaking after the meeting, Habeck declined to comment on specific subsidies, stressing that the industry needed "the ability to plan long term".

The minister warned against quick solutions to "pump up the market again in the short term" only for sales to fall again once the measures elapsed.

Another pressing matter for the industry was "CO2 regulations in Europe," Ola Kallenius, CEO of luxury carmaker Mercedes-Benz, told the Handelsblatt Financial Daily.

Habeck said he had discussed the possibility of bringing forward a planned revision to EU emissions standards with participants but could "not promise" any changes.

Germany's other leading vehicle manufacturers also face major problems.

In recent weeks, both Mercedes and BMW lowered their outlooks for the year in part due to weak sales in China.

After investing heavily in the world's number two economy in recent decades, German manufacturers have seen their market share shrink due to fierce competition from Chinese rivals, who have shifted more quickly to electric vehicles.

Higher costs in Germany, in particular, due to rising energy prices, have added to their problems.

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