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Merkel, carmakers seek to mitigate coronavirus impact

May 5, 2020

With Germany's carmakers battered by the coronavirus pandemic, the industry chiefs discussed state subsidies with Chancellor Angela Merkel. The key question of state-provided bonuses for car buyers remain unanswered.

BMW-Werk Leipzig
Image: picture-alliance/dpa/J. Woitas

Germany's Chancellor Merkel held a video-conference with representatives of the country's powerful car industry on Tuesday, including representatives of BMW, Volkswagen, and Daimler, which owns the Mercedes-Benz brand. Several German ministers also took part in the call.

The industry hopes for the state's help in boosting sales amid the pandemic. Most notably, carmakers want the government to offer large financial incentives for car buyers. However, the government refused to provide a definite answer following the Tuesday summit, saying that deliberations would continue until early June.

The participants would be discussing stimulus measures  aimed at modernization and a push towards "more innovative vehicle technologies," said Angela Merkel's spokesman Steffen Seibert, adding that the "results" of these talks would be discussed next month.

Read more:  Coronavirus compounds problems for German carmakers

Carmakers need 'a short-term impulse'

Ahead of the Tuesday conference,  the heads of German states discussed awarding up to €3,000 ($3,266) to the buyers of diesel and gasoline-powered cars, and up to €4,000 for e-cars, hybrids, and hydrogen-powered vehicles. The idea was spearheaded by the three German states most dependent on the car industry — Lower Saxony (VW), Bavaria (BMW), and Baden-Württemberg (Porsche, Daimler).

Bavarian Premier Söder said the the car industry in his state needed "a short-term impulse."

"If we are doing it, we should do it quickly," he told reporters on Tuesday.Industry representatives also complained about the delay, claiming that indecision on bonuses would drive the demand even lower. "Nobody will buy a car as long as there is buying incentive hanging in the air and no decision is made," said the head of the metal industry association NidersachsenMetall, Volker Schimdt.

No economic sense

Separately, Green party politicians slammed the idea and urged the government to pressure the car industry into changing its ways.

"What is needed is an intelligent support for electric cars and plug-in hybrids with a significantly bigger range than today," senior Green party lawmaker Oliver Krischer told the DPA news agency ahead of the meeting.

The head of the prestigious IfW economic institute meanwhile warned that the "car buying bonuses make no economic sense" and would not help protect the climate.

"Those who want to support the German car industry would do better by expanding the possibilities of [tax] write-offs for investments and with a generous support for research and development," said IfW chief Gabriel Felbermayr.

Read more:  German companies take coronavirus state aid yet still plan on paying billions in dividends

Glass-chinned giants

Major carmakers had been facing a crisis of their own long before the coronavirus pandemic reached Germany — owing to an array of factors including the declining demand for new vehicles in much of the world, the US and China trade war, EU officials demanding more environmentally friendly cars, and the gradual transition away from the internal combustion engine.

Deutschland Angela Merkel bei Porsche
Germany's car industry has lost much of the luster it had in Merkel's earlier yearsImage: picture-alliance/dpa/dpaweb

Initially, the infection hit their plants and buyers in their most important global market, China. Then, it prompted a weeks-long standstill in their European factories, while garages and forecourts closed their doors to customers during the lockdown. This was shown in UK new car sales figures for April published on Tuesday — almost all of the just 4,000 new models sold that month (the worst figure since February 1946) were fleet cars purchased by companies; private purchasing was all but wiped out while the UK was under orders to stay at home.

Production has been picking up with the easing of lockdown measures across the continent, but demand remains low.

The industry provides some 800,000 jobs across Germany.

dj/msh (Reuters, dpa)

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