German coalition considers helping carmakers

Kamil Kowalcze and Christoph Rauwald
| Bloomberg

German Economy Minister Robert Habeck said the three parties in Berlin’s ruling coalition would seek to overcome their differences and find ways to help stabilise the country’s struggling carmakers.

Habeck, a Green Party member and vice-chancellor, held a video conference with auto industry executives and labor representatives on Monday in a fresh attempt to address the problems plaguing the country’s most important industry.

“What was interesting to me was that the message that came out of the discussion was that we need clear and reliable signals to the market,” Habeck told reporters. “We don’t need short circuits or flashes in the pan.”

Finance Minister Christian Lindner had earlier indicated he was unlikely to support a proposal by Chancellor Olaf Scholz’s SPD party to reintroduce a scrappage premium worth €6,000 ($6,666) for drivers who swap their combustion-powered cars for electric vehicles.

“I don’t want to focus on the proposals of the other parties at the moment,” Lindner, a budget hawk who is also chairman of the Free Democrats, told a news conference in Berlin. It was the latest sign of discord within the governing alliance, which has publicly sparred in recent months over limited funds.

“I regret that there is no internal debate on what can be done now to strengthen the framework conditions for the automotive industry, but that individual proposals are now being made public,” Lindner added.

The European auto industry has been buffeted by falling demand for electric vehicles after governments including Germany cut financial incentives. Carmakers have also been hit particularly hard by falling demand in China, a key market for Volkswagen AG, Mercedes-Benz AG and BMW AG.

On Friday, Habeck raised the possibility of further support for the sector. During a visit to a VW plant in northwest Germany, he told workers that while automakers must take some responsibility for their current difficulties, he felt “obliged to do something to revive the market.”

BMW released a statement Monday addressing what it called “the demands circulating around today’s automotive summit.”

“The German automotive industry does not need short-term flashpoints that distort the market,” the company said via email. “Instead, the focus should be on sustainable framework conditions that make it easier for customers to decide in favor of electric vehicles.”

Deliveries of electric vehicles in Germany – the region’s largest car market – fell 69% in August, leading to a 36% decline across the region, the European Automobile Manufacturers’ Association said last week.

German auto giants have been dealing with a barrage of bad news. Mercedes-Benz joined BMW last week in cutting its full-year forecast, citing weak demand for cars in China.

Chief Executive Ola Källenius has promised he will do everything in his power to improve yields, which could indicate further efforts to cut costs.

VW, the continent’s largest carmaker, is considering closing factories in Germany for the first time because of falling demand.

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With the assistance of Wilfried Eckl-Dorna and Joshua Gallu.