German Chancellor Angela Merkel wants to help offset the higher costs of cleaner vehicles by putting a price on carbon-dioxide emissions, potentially offering a lift to the country's vital auto industry as it grapples with the high-risk transition away from the combustion engine.
Germany and its automakers are facing a “Herculean task,” Merkel said Thursday at a ceremony opening the Frankfurt auto show to the public. While short on specifics, the German leader backed efforts to encourage consumers to buy more environmentally friendly products such as battery-powered cars fueled by renewable power.
“We want to direct the behavior of people in a certain direction,” she said. “The pricing of CO2 is the right way to make clear that all innovations should follow the goal of emitting less CO2. If we do this in a long-term and accountable way, there will be the incentives to move innovation in the right direction.”
Volkswagen Group, Daimler AG and BMW Group are facing tough times. Pollution concerns -- intensified by VW’s 2015 diesel-cheating scandal -- have tarnished the industry’s image and triggered massive investment in electric vehicles. Those costs had already started squeezing earnings when almost a decade of uninterrupted industry growth led by China came to a halt. The consequence is Germany’s car production slumping to the lowest level since at least 2010.
The looming end of the combustion-engine era and the dramatically increasing importance of digital technologies in cars pose an unprecedented threat to the industry’s traditional business model. A slew of profit warnings from manufacturers like Mercedes-Benz maker Daimler to parts makers like Continental AG provided fresh evidence that times have become rough.
Germany is teetering on the brink of recession, and the auto industry is pivotal to the economy’s health. Automakers such as Volkswagen, Daimler and BMW as well as parts suppliers like Robert Bosch and Continental employ about 830,000 people in the country and support everything from machine makers to advertising agencies and cleaning services.
Germany’s auto industry is trying to respond. Electric cars, such as the flashy Porsche Taycan and more affordable VW ID3, dominated media presentations this week at the Frankfurt auto show and more models are in the pipeline. But demand for electric cars has been sluggish.
Kerrigan Advisors recently sat down with Donnie and Denny Buckalew, co-owners of Buckalew Chevrolet, the 5th highest-volume Chevrolet dealership in Houston, Texas, to discuss their perspective on the changing auto retail industry and how challenges facing single-point dealers influenced their decision to sell their dealership.
Merkel had to surrender her goal to have 1 million electric cars on German roads by 2020. Sales of hybrid and electric cars in the country last year totaled a mere 55,000 vehicles, or 1.6 percent of the market. In addition to boosting efficient technologies, the country needs to accelerate the roll-out of charging stations to ease consumer concerns, she said.
“If one believes that climate protection is a task for mankind, and I believe it is, then we must pay this price because otherwise we will have to pay a totally different price,” Merkel said.
