During an online “automotive summit” on September 23, Federal Minister of Economy Robert Habeck, automakers, associations, and unions sought solutions to the crisis facing the German automotive industry.
The automotive industry, a key sector in Germany, is in crisis. A solution discussed? A 6,000-euro bonus (6,600 dollars) for drivers who switch from a combustion engine to a new electric car and 3,000 euros for a used electric vehicle. This is what the economic leaders of the SPD parliamentary group, the German Social Democratic Party, proposed during the most recent automotive summit.
During the 2009 economic crisis, Germany had already promoted the replacement of cars with a bonus. Anyone who scrapped their old car and bought a new one received a 2500 euro environmental bonus. Some opposition parties called the proposal “absurd.” “The scrappage bonus had no effect on car demand at the time,” criticized Ulrich Lange, vice-chairman of the conservative CDU/CSU parliamentary group.
Other proposals made at the automotive summit include a government-subsidized reduction for electric car leasing for low or middle-income individuals and funding for private charging stations.
The Europen Union aims to gradually strengthen targets for harmful vehicle carbon dioxide (CO2) emissions. The current average of 115.1 grams of CO2 emissions per kilometer per vehicle should decrease progressively to 49.5 grams by 2030.
The IG Metall union believes a new funding program for electromobility is necessary. “The funding plan should help accelerate the ramp-up of electric mobility,” said a union spokesperson in a statement.
A German automotive industry under pressure
The German automotive industry, a long-standing economic pillar, is under increasing pressure as global competition intensifies.
According to the federal ministry of economy and climate action, the sector remains by far “the most important industrial branch in Germany,” generating 564 billion euros (628 billion dollars) in revenue in 2023. However, industry experts warn that rising energy costs, competition from Chinese manufacturers, and the delay in electric mobility threaten its future.
The automotive summit comes at a tense time after austerity measures were announced at Volkswagen, a symbol of German industrial power. In August, the Volkswagen electric car plant in Zwickau was closed. The company has already eliminated night shifts and terminated the contracts of hundreds of temporary workers. What began as a cost-cutting measure quickly turned into a seismic event: one of Germany’s most famous carmakers announced that it might close several of its plants for the first time in 87 years of company history.
The company’s struggle to transition from traditional internal combustion engines to electric vehicles highlights the German automotive industry’s broader challenges. As Europe’s largest economy grapples with increasing competition, declining production, and political instability, the prospect of Volkswagen plant closures could mark the beginning of a difficult era for Germany as an industrial power.
Electric car sales have plummeted in the country, with a 36.8% drop in July compared to the previous year, due to the slowdown in government financial incentives for these vehicles. Indeed, the environmental bonus in Germany had gradually decreased from 6,000 to 3,000 euros for vehicles under 40,000 euros in 2022 and had disappeared entirely for cars over 45,000 euros. A decision explained at the time by the increase in sales, as stated by Economy Minister Robert Habeck in 2022: “Electric vehicles are becoming more and more popular and will no longer need government subsidies in the near future.”
Electric car registrations in the European Union also saw a 10.8% decrease in July, according to recently published figures by the European Automobile Manufacturers’ Association (ACEA). In total, 102,705 electric cars were sold in July, with the market share down to 12.1% compared to 13.5% for the same month last year.
