Traffic light end in Berlin: What is in store for the car industry now?

The current federal government broke up on November 6 in a dispute. In view of the current difficult economic situation, the question now arises: What is in store for the automotive industry?

The current difficult situation of the German automotive industry became even more complicated on November 6, 2024. In the USA, for example, not only was a new US president elected with Donald Trump, who already worked with protectionist policies in his first term in office and will probably continue to impose increased tariffs, including against the EU, in the future. In addition, the previous federal government has now broken up in the dispute over the 2025 budget, so that a minority government is sitting in Berlin for the time being.

Are rescue packages or subsidies for industry feasible?

In the course of the crisis at Volkswagen, calls have been made for subsidies such as the reintroduction of the e-car premium for private buyers or a scrapping bonus 2.0. Especially after Volkswagen announced that it would consider not only salary cuts, but also plant closures and general job cuts, calls for state aid for industry are increasing. With reports of a slump in profits at BMW and Audi, the problems have long since reached other German manufacturers, so that the crisis is more than just acute.

In his speech on the evening of 6 November, Chancellor Olaf Scholz (SPD) explicitly emphasised that support for the car industry was part of the negotiations on the 2025 budget, which ultimately led to the coalition breakup. So the government wants to keep the window open to possibly directly support the industry. Whether this will work as a minority government without its own majority is questionable. Another problem is that a valid budget for 2025 has still not been adopted. The now only red-green government must therefore work together with the previous opposition parties for further projects, and such cooperation is more than questionable, after the largest opposition party, CDU, has demanded that new elections be held as soon as possible. Chancellor Scholz has so far announced that he will not ask for a vote of confidence until next year on January 15 in order to enable new elections in March.

Difficult environment for support for the automotive industry

At the moment, there is only commercial funding for e-cars to support the weakening car industry in Germany. According to Volkswagen's austerity plans, this is unlikely to be enough to preserve all jobs in industry. The suppliers of the major car brands are also in trouble and want to save costs with job cuts. How far additional aid for industry should go is also still part of the discussion. Some sides are calling for more premiums for e-cars, while others, such as Mercedes, prefer to call for a weakening of the CO2 fleet targets. Porsche only recently rushed ahead with the demand for an exit from the EU's internal combustion engine.

So there is still a great deal of disagreement as to which means of supporting the car industry seems to make the most sense and is also financially viable. With the end of the government majority in Berling, plans for an expansion of e-car subsidies or other support measures are also likely to be on hold for the time being. Not necessarily because of a lack of will, but simply because the minority government now in office has hardly any room for manoeuvre.