“Who betrayed us?” – “Social Democrats!” – Again. This could sum up THE criticism of the SPD by IG Metall CEO Jörg Hofmann and its rejection of a general car purchase premium. New German is then talking about prevailing disappointment, alienation and an “industrial-political ghost ride”. “Stinksauer” are the colleagues, says Michael Brecht, head of Daimler’s works council.
The consequences of the Corona crisis are hitting the most important industry in our country, the automotive industry, hard. In 2019, the companies in the sector generated sales of around 435 billion euros and employed more than 830,000 people. This cannot be ignored and this must be taken into account in crisis management. The number of new registrations fell sharply in April 2020 compared to the same month of the previous year. 57.8 percent for private customers and 63.2 percent for commercial customers. The calls of the corporations and the IGM seem justified. The car states of Baden-Württemberg, Bavaria and Lower Saxony demanded 3,000 euros per new “petrol” or diesel car, plus 1,000 euros extra if an old car is scrapped.
So yes! “Who betrayed us?” – “Social…” – Moooment! It’s not that simple. The German automotive industry generates around two-thirds of its sales abroad. Here, for example, VW reports that Europe-wide sales have slumped by more than 83 percent. Outside Europe, the decline is in part even more serious. This dramatic slump caused by a global crisis will not even be cushioned by a car purchase premium in Germany alone.
In addition, we are seeing an all-time high number of short-time workers at home: even at the height of the economic and financial crisis, “only” 1.44 million short-time workers were registered in Germany in May 2009. By 26 April 2020, however, companies have registered short-time work for 10.1 million people. That’s about one in four (!) Employees. These people, who are looking to the future with the greatest concern, will have other things in mind at the moment than to buy a new car. And a premium should not change that.
Already after the economic and financial crisis, the car industry was tried to support it: the “environmental premium”, popularly known as the scrapping premium, has shown, however, that it has been relatively expensive at EUR 5 billion and, as a result, only partially sustainable economically and ecologically. In many cases, purchasing decisions were only preferred, and sales figures subsequently declined again.
After the emissions scandal, the deliberate deception of thousands of customers by the corporations, a tentative rethinking of alternative drives took place. Mostly for image reasons. The state has also helped in this (self-inflicted) crisis since 2016: by promoting electric and hybrid vehicles. The corporations were able to “continue.”
In 2019, VW’s operating profit rose by 12.8 percent to almost EUR 20 billion, while the return on sales of 7.6 percent was significantly higher than the forecast return margin. As a result, dividends have also been significantly increased. As the Handelsblatt reports in February 2020: “For thehe preference share, which is not voting rights, will receive a dividend of EUR 6.56 for 2019 (previous year: EUR 4.86), with the ordinary share going up from EUR 4.80 to EUR 6.50. This is particularly benefiting the owner families Porsche and Piéch, which hold around 53 percent of the ordinary shares.”
Now we are struggling with the consequences of the Corona crisis. Now it is to set up an “innovation premium”. And corporations and trade unions complain that conventional drives are not being promoted. By calling for a premium for all cars, the industry may even have helped to reduce sales: some people will have initially postponed their purchase decision in the hope of government support. You now “only” benefit from the reduction in VAT.
The corporations (and in this case the trade unions) forget one thing in their massive criticism: the world is evolving. A stubborn adherence to the status quo, a preservation of what is, will hit the automotive industry much harder than the Corona crisis in the long run. The developments of recent years have already been blatantly ignored and the structural change that is taking place has been delayed. With devastating consequences: If the share of German carmakers in the important Chinese market for gasoline and diesel vehicles is 23.2 percent, it is just 0.4 percent for electric vehicles. Others are already racing here. Among the top 10 best-selling electric cars in the world, there is not a single German brand. Germany is threatening to squander its standing as one of the leading industrial and export nations.
The SPD has prevailed in the coalition committee and there will be no blanket support for conventional drives. This attitude is once again a criticism of the party. If, on the other hand, the automotive industry uses the political signal, seriously addresses structural change and rethinks its strategies, this impulse can help it to adapt to the new needs of the market. This secures sustainable market shares, profits – and employment. In the long run, the SPD may have done the industry a great service – even if it may not (yet) recognize it.