What measures is Scholz's administration taking to address the automotive sector's decline - Germany

Introduction

Acting Chancellor Olaf Scholz’s administration is taking several measures to address the decline in Germany’s automotive sector

Proposed European EV Subsidy Program

Scholz has called for a European-wide subsidy program for electric vehicles to stimulate demand and support the industry’s transition.

This proposal includes

Financial incentives to purchase electric cars across Europe

Possible targeted support for vehicles produced in Germany

A model potentially inspired by France’s approach, which ties subsidies to strict environmental criteria

Advocating for EU Policy Adjustments

The administration is pushing for changes at the EU level

Urging the EU to avoid imposing financial penalties on carmakers that fail to meet 2025 emissions reduction targets

Calling for greater flexibility in EU legislation regarding emissions standards

Proposing alternatives to sanctions that would allow companies to invest in modernization instead of paying fines

Domestic Support Measures

Scholz has emphasized the need for:

Maintaining low energy prices for manufacturers

Preserving tax advantages for electric company cars

Exploring options for sales support that work across Europe or gaining EU approval for production incentives in Germany

Strategic Dialogue with Industry

The administration supports

Participating in the European Commission’s planned strategic dialogue with the automotive industry, set to launch in January 2025

Discussing key issues such as tariffs on electric vehicles from China, the current state of the European automotive industry, and measures to boost demand for European-made electric vehicles

Addressing Competitiveness

To improve the sector’s global competitiveness, the government is considering

Potential tax and business incentives to combat Chinese competition in the electric car market

Exploring ways to keep investment within companies for modernization efforts

Balancing ambitious CO2 fleet regulation goals with political support and incentives

In Scholz plan we did not see any place for exports?

A significant portion of cars produced in Germany are exported:

Export Rate

Approximately 77.8% of all cars produced in Germany are exported worldwide

For electric vehicles, the export rate is even higher

80.3% of all electric cars produced in Germany are exported

81.2% of purely battery-electric vehicles (BEVs) produced in Germany are exported

Export Volume

In 2023, Germany exported around 3.11 million passenger cars

For the first 8 months of 2024, about 2.1 million new cars were exported from Germany

Export Value

In 2022, Germany’s car exports were valued at $155.14 billion, making it the top car exporter by value globally

These figures highlight Germany’s strong position as a major car exporter, with the vast majority of its automotive production destined for international markets.

Conclusion

These measures aim to revitalize Germany’s automotive industry, protect jobs, and support the transition to electric vehicles while maintaining the sector’s competitiveness in the global market.

All these are great solutions , alternatives and possibilities but result yet to be seen.

Given the robust export figures, it is imperative for the government to provide incentives to all stakeholders to further enhance exports to new markets. Targeting large markets in Southeast Asia should be a priority.

Chancellor Scholz is expected to vacate his position by February, and a new Chancellor will assume office. It will be crucial to assess the new proposals aimed at reviving the automobile industry.

Revitalizing a declining automotive sector could potentially require a solid five years, considering the bureaucratic challenges automakers face with both the government and the European Union.

We firmly believe that Germany should refrain from supporting conflicts, given its status as one of the largest economies in Europe, capable of influencing EU decisions.

Furthermore, Germany should consider opening its immigration policies exclusively to highly qualified individuals. Such policies should be reviewed meticulously to address and mitigate internal issues of violence and discrimination. Refugees should be offered training in economically beneficial areas for Germany, which would reduce the overall burden and maintain a focus on economic growth. to increase exports further to even newer markets. Large markets in south east Asia should be targeted.