Europe’s auto industry is in big trouble from the coronavirus crisis and is looking to policymakers to clear the road for a successful recovery when it finally ends.
As factories across the Continent have been forced to close, the industry estimates more than 1.1 million car workers are affected and over 1.2 million fewer vehicles have been produced. “It is becoming increasingly clear that COVID-19 has led to the worst crisis ever to impact the automotive sector,” said Eric-Mark Huitema, director general of the European Automobile Manufacturers’ Association (ACEA), which represents big players such as PSA Group and Volkswagen in Brussels.
National efforts to underwrite industry with billions of euros in grants, loans and guarantees have helped relieve immediate cash-flow fears. But industry argues the support shouldn’t end there.
“The economy will need further support to avoid a long depression like we saw in the 1930s,” said Sigrid de Vries, secretary-general of CLEPA, the lobby representing automotive parts makers in Brussels.
POLITICO canvassed analysts and industry executives to plot six areas where automakers are looking to policymakers to step in.
In China, auto bosses are seeing demand creep up after weeks of shutdown. That offers a tantalizing promise for Europe, as carmakers could do brisk business during the summer if the lockdown ends quickly. But priority No. 1 for the industry is making sure that when things get back to normal, consumers do indeed hit the showrooms.
One idea would be for the European Commission to push for VAT to be halved on new cars, said Ferdinand Dudenhöffer, a professor at the Institute for Customer Insight at the University of St. Gallen in Switzerland. “Demand for high quality private consumer goods must be the key issue, because only demand saves the industry,” he said, noting that injecting investment will do little to save jobs unless sales hold up.
To further boost demand, another idea is for national authorities to set up scrappage schemes to get drivers to trade in older Euro 4 emissions standard cars. Some argue that would also help keep the EU’s green ambitions intact, since it would get dirtier vehicles off the road — but unlike many existing schemes, it wouldn’t only apply for customers planning to buy an electric vehicle but also newer, more efficient petrol and diesel models.
“A CO2 rated scheme makes sense as some private drivers might not fit the customer profile of plug-ins right now,” said Matthias Schmidt, an analyst based in Berlin who monitors carmaker emissions. In Germany, such a program has already been used to increase the roll-out of electric cars but it involved a major public cash injection.
Most carmakers maintain they’re still on track to meet fleetwide CO2 reduction targets for this year as mandated by EU rules. Yet they have also indicated they want flexibility on legislative deadlines from Brussels — and the emissions rules, under which manufacturers face high fines for non-compliance, are an obvious target.
“The biggest irony would be if local governments were supporting the industry with financial support … [but] the whole market is completely off and they would have to pay millions or billions in fines for not meeting CO2 targets,” said Henner Lehne, head of automotive forecasting at the London-based consultancy IHS-Markit.
One solution could be revising down the volume of sales needed to meet the targets this year from 95 percent to, say, 80 percent, allowing greater leeway. Alternatively, the Commission could defer fines for non-compliance to be paid at a later date, one auto executive said.
Lehne said European policymakers should start a conversation on the issue now. But any attempt to tamper with the rules, set back in 2009 in a bid to clean up air quality, will encounter stiff resistance in the European Parliament.
“Under no circumstances should the COVID-19 crisis be instrumentalized to justify measures that are harmful to air quality and citizens’ health,” wrote Karima Delli, a senior French Green lawmaker, in a letter to Commission President Ursula von der Leyen this week, obtained by POLITICO.
With so many staff taken off the production lines, companies are hoping they can find a way to shift the burden of covering salaries and stave off mass redundancies.
Carmakers may be buoyed by the Commission’s promise of an EU-wide wage support system for regions particularly affected by the coronavirus, for example around cities such as Milan and Madrid. But while Brussels wants action, the plans are a long way from becoming reality and will likely face skepticism from EU countries over how they would interface with national unemployment benefits, and who will pay.
Wage assistance programs where governments step in to cover part of the labor cost are already in place in many EU countries. In Germany, the program means Volkswagen has been able to move 80,000 staff onto the so-called short-work system where the government pays part of their salaries.
To allow the industry to reorient itself, especially if the downturn drags on, Dudenhöffer argues the EU should effectively suspend competition audits on new mergers for at least a year — and wave through any merger worth less than €3 billion in combined turnover.
“In the post-corona period, it will be particularly important for medium-sized companies to reposition themselves internationally in a competitive way,” he said.
For now, as the Brussels policymaking machine remains sidetracked, the Commission has for practical reasons encouraged companies to delay merger notifications “where possible.” Officials may also delay moving forward with in-depth merger probes.
The industry’s mega-merger currently being developed between PSA Group and Fiat Chrysler is yet to be notified to the Commission.
According to de Vries, the Commission needs to take a role in coordinating how the industry bounces back. “It’s an intricate clockwork that came to an abrupt standstill,” she said.
The EU executive’s guidance should cover when to lift restrictions and define clear criteria for when the crisis should be declared over, “making sure that we exit this crisis more elegantly than we stumbled into it,” de Vries said.
This article is part of POLITICO’s premium policy service: Pro Mobility. From the digitization of the automotive sector to aviation policy, logistics and more, our specialized journalists keep you on top of the topics driving the Mobility policy agenda. Email [email protected] for a complimentary trial.
Click Here: cheap sydney roosters jersey