Sunday's election outcome in France, in which a moderate Europhile investment banker won the first round of the presidential vote, was met with relief by German's auto industry.
The victory by Emmanuel Macron over leading far-right populist Marine Le Pen – widely expected to be confirmed in two-weeks' time in the run-off – is seen as a victory for the euro, free trade and open borders.
It may also help to ensure market demand does not stagnate as predicted as fleet customers in particular feel more comfortable ordering cars amid a stable political environment. Although calendar effects have helped, new-car registrations in the EU surged 8.4 percent in the first quarter.
Germany's auto industry praised the outcome as a vote against "protectionism and isolationism" and endorsed Macron for the second round.
"A young and committed proponent of the market economy rose to the top, someone who stands for a European France," the head of the industry's association, VDA President Matthias Wissmann, said in a statement on Monday. "We know from discussions with Macron that he knows and understands in detail the challenges facing manufacturers in Europe and carmakers in particular."
At the start of this year, things looked bleak for Europe's automakers. In the U.S., the new president, Donald Trump had attacked BMW – the biggest U.S. car exporter by value – for its plans to import 3-series sedans into the U.S. from Mexico. In the UK, a key export market for Germany's car companies, the British government was refusing to rule out the possibility of a hard Brexit with no EU trade deal.
If there is one thing that executives fear the most, it's political risks because they lie entirely beyond any company's control. Manufacturers in Germany, for example, are extremely worried that talk from Stuttgart's mayor about banning even Euro 5 diesels – some barely two years old – from entering the city next year is prompting people across Germany to abandon the compression ignition engine altogether. Diesel penetration rates of only 40 percent in March was a "catastrophe" for fleet emission targets, one senior German official told me in confidence.
Populist victories in the UK and U.S. threaten free trade and the re-imposition of border controls could destabilize the highly complex international flow of goods into and out of manufacturing plants across the world.
When I asked Opel CEO Karl-Thomas Neumann in Geneva last year what the possible loss of Schengen's open borders in the name of greater internal security might mean for his business, he described it as a "a horror scenario."
BMW CEO Harald Krueger doesn't get tired of repeating the importance of free trade for his business, and accompanied German Chancellor Angela Merkel in March on a trip to the U.S. to push his case to President Trump personally. Meanwhile Daimler CEO Dieter Zetsche repeatedly refused flat out to speculate on a Trump-style border adjustment tax.
"We have a lot of elections around Europe and a lot can change of course," Ford of Europe CEO Jim Farley said in November, summing up the sentiment in the industry going into the year.
French populist Marine Le Pen, who had long led the 11-candidate pack going into the first round, wanted to place the country's membership in the euro to a vote, dubbing herself "Madame Frexit." Had she received closer to 30 percent instead of the 21 percent she garnered, it would have prompted doubts over whether France might put an end to the continent's most ambitious political project.
Yet, the real disaster scenario for carmakers on Sunday was not Le Pen winning the first round, but that the charismatic far-left firebrand Jean-Luc Melenchon would defy pollsters by coming in second and force France to choose between two extreme views that both opposed the EU and euro.
"The first election round in France showed that policies opposing a market-based economy from both the extreme right and the extreme left do not enjoy majority support," the VDA's Wissmann said.
Macron, a former Rothschild banker and the most unabashedly pro-EU candidate among the group, wants to bolster relations with industry-heavyweight Germany. While there are still two weeks to go, there is little reason to believe Le Pen has a chance against "France's John F. Kennedy," with most politicians already rallying behind Macron.
The past might also serve as an indicator: when Le Pen contested the northern French region of Nord-Pas-des-Calais around Lille she garnered only 43 percent of the vote in the run-off despite the election being held at the height of the refugee crisis in December 2015. I would be surprised if she does even that well in May.
After Sunday's results and the defeat in March of Dutch populists, the threat of a fragmentation of continental Europe and therefor of the single currency looks like it could be on the wane. The much feared chain-reaction after first Brexit and then Trump has not materialized and it's a safe bet that Germany will continue with a government of the center.
With just months to go before Germany heads for the ballot box, support for the far-right AfD party has been tumbling and its leader, Frauke Petry, looks increasingly vulnerable to internal party rivalries.
Meanwhile the rise of Social Democrat candidate Martin Schulz in Germany, who is the former president of the European Parliament and so is seen as the very personification of Brussels, at the cost of the AfD shows that much of the far-right support stems from protest voters who do not share its platforms, which include withdrawing from the euro zone.
Indeed, even Monday's sharp rise in the value of the euro following the French result shouldn't be a cause for concern, since its appreciation is a signal of confidence by investors who are unwinding the currency's significant discount to the dollar. On a purchasing power parity model, a euro should be trading closer to $1.33 according to estimates from the OECD, rather than the $1.09 currently.
That means industry executives in Germany can go back to worrying about regulations affecting diesel cars in Stuttgart. Recently I asked a source at the VDA whether its member companies might upgrade their current estimate for a flat market this year in view of the 6.2 percent gain in the first quarter.
The feeling is that it would be best to wait and see how strong the calendar effect from Easter falling in April this year rather than March. If there isn't a sudden abrupt plunge, however, it's entirely possible that the VDA hike its forecast of 3.4 million vehicles for Germany and 13.9 million in Western Europe in view of the stabilizing political conditions.