The German automotive industry is in big trouble and is anxiously awaiting the outcome of the snap elections scheduled for February 23. The economy is in recession, and the current ruling so-called "traffic light coalition" (SPD-Greens-Liberals) is held directly responsible for some of the failures.
Incentives for electric cars?
The key point for all car manufacturers is the move away from the internal combustion engine and the introduction of alternative drive models. Independent analyst Jürgen Piper from Frankfurt, like many experts, notes the ongoing uncertainty among car manufacturers, but also among buyers. The main reason, he says, is that in Germany “there is no clear line regarding electromobility.” The government first encouraged the purchase of electric cars, then abolished subsidies.
Dirk Dohze from the Kiel Institute for the World Economy (IfW) told DW that the uncertainty was particularly contributed to by the "short-term abolition of the so-called environmental bonus in December 2023." In addition, the industry is suffering from "high energy costs and excessive bureaucracy."
When asked what is most troubling German car manufacturers, the Association of the German Automotive Industry (VDA) points to the main problem: unsatisfactory production conditions in Germany. This reduces the competitiveness of companies. A worrying trend has been observed for years: Germany is constantly falling on international competitiveness lists.
Energy is too expensive.
The question of how attractive Germany is as an industrial location is of key importance to the lobbying alliance. The VDA is therefore calling for "Berlin and Brussels to return Germany to the top of the world list." This requires "lower energy prices, less regulation and bureaucracy, and a competitive tax system," the VDA says.
Economist Dohze also points to the negative influence of the European Union: "The demands related to climate protection come from the EU and the German government has only limited influence there."
However, there is also some responsibility that the industry itself bears for the current crisis: “The necessary structural adjustments were delayed for too long, which led to a sharp decline in profit margins. It took German companies a very long time to connect with strong software partners.” The result: German car manufacturers have no real hit on the electric car market.
More filling stations
For Dirk Dohze, the priority is “the rapid development of charging infrastructure and ensuring planning for electric car buyers.” Whether subsidies for buying electric cars are beneficial is always debatable, but the rules should certainly be clear and transparent, and apply for a certain period. Furthermore, these subsidies should be paid reliably, and not be withdrawn depending on the state's coffers, he says.
Jürgen Piper is also looking for "a clear line for new technologies, which everyone will then follow". There should not be too much regulation, but rather an openness to different technological solutions. Policy should "set precise quantified goals, but leave it to industry to find its own way to achieve them".
Cars and politics
The automotive industry and politics are closely intertwined in Germany, not only at the federal level, but sometimes even more so at the state level. Car manufacturers are therefore dependent – right down to the local level – on favourable taxes and contributions. At the same time, the jobs the industry provides are very important for state policy and are worth protecting.
In Lower Saxony, where the SPD leads the government and its representatives sit on the Volkswagen supervisory board, this connection is obvious. This is also the case in Baden-Württemberg, under Prime Minister Kretschmann of the Greens (with Mercedes and Porsche, which belong to the Volkswagen Group), and in Bavaria, which has been ruled by the CSU for decades – with Audi in Ingolstadt (also a Volkswagen brand) and BMW in Munich, these connections are deeply rooted.
Due to Germany's federal structure, as well as the interdependence and influence of the federal, state and local levels, the outcome of elections – at whatever level – always has an impact on the automotive industry. That's why no car manufacturer can afford to ignore politicians. Companies must remain open to all political options in order to be able to exert their influence, regardless of the outcome of the elections.
And again: fear of Trump
But new or different industrial policies are not just being decided in Berlin and Brussels. The policies of the new US government will also have a major influence, reminds Jürgen Piper: "Given the economic crisis and the expected pressure from the Trump administration (threats of high tariffs), the new German government will probably try to make it easier for the German automotive industry to do business."
This could then lead to a "postponement of the ban on internal combustion engines for new vehicles" or the reintroduction of "subsidies for the purchase of electric and hybrid cars."
Independent analyst Jürgen Piper says it is currently unclear, however, whether there will actually be a new industrial policy in Germany from March. "It is very likely that we will have a coalition of the Christian Democrats and Social Democrats or the Christian Democrats and the Greens. In the first case, the end of the internal combustion engine, scheduled for 2035, could be postponed to 2040, while in the second case this is less likely," Piper tells DW.
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