Calls grow for state aid to support embattled German car industry

Labour unions and political parties in Germany are calling for a public investment fund to help the country's struggling automotive industry weather the double impact of coronavirus and the sector’s transition to low emission mobility. One day before Chancellor Angela Merkel meets with car industry representatives in Berlin, Norbert Walter-Borjans, head of the government coalition party SPD, said car industry suppliers in particular would benefit from political support, cautioning that the sector "is our industry's backbone" and millions of jobs depend on it. "Policymakers can make an important contribution by getting involved," he argued according to an article by news website t-online. However, Walter-Borjans defended his party's decision to ban cars with internal combustion engines from the government's buyer's premium scheme for car purchases, arguing that "state aid must facilitate the shift to propulsion systems of the future."

The Green Party and labour union IG Metall have also argued that a public investment fund for car industry suppliers could help companies cushion the effects of the pandemic and assist them in the transformation away from fossil fuel-powered cars, the Frankfurter Allgemeine Sonntagzeitung reports. "If the state assumed part of the risks, small and medium sized companies could gain the strength to carry out investments and achieve innovations," IG Metall head Jörg Hofmann said in an interview. Green Party leader Annalena Baerbock said small and medium sized companies will need help to gain more time in mastering the transition. "Given that there are more than 800,000 jobs in the car industry, no politician can say: I don't care about them, they have to take care of themselves," she explained. 

Bavaria's state premier Markus Söder has also said the car industry should not be left alone to deal with the various challenges it is facing, arguing that a buyer's premium for fossil fuel-powered cars would be an appropriate political tool. In an article by news agency dpa carried by Handelsblatt, the head of Bavarian conservative party CSU said the SPD's adamant rejection of the premium shows that the party had "lost its love for the car." He argued that modern combustion engines make an important contribution to improving Germany’s emissions reduction record in the transport sector, and claimed these engines will be needed as a "bridge until we have completely switched to electric or other forms of engines, like hybrid or hydrogen."

An analysis by the German Economic Institute (IW) found that Germany's car industry has begun to lose its leading position in the country's economy. In 2018, a "golden decade" for German carmakers ended as global car markets contracted. German carmakers and smaller suppliers are especially challenged by the transition to different propulsion systems, and the pandemic has only added to these problems. "As a consequence, the car industry is facing job losses for the first time in a decade and will fall away as Germany's growth engine for the near future."