The German government is reportedly considering a series of measures to bolster its struggling automotive industry ahead of a critical auto summit this Thursday, sparking debate over the balance between climate goals and industrial competitiveness. Proposals under discussion highlight a potential shift towards protectionist policies and a renegotiation of emissions targets.
At the core of the deliberations is a plan to link support for German automotive giants with assistance for the domestic steel industry. Sources within the governing coalition – a partnership between the Christian Democratic Union (CDU) and the Social Democratic Party (SPD) – indicate that the government is exploring the possibility of granting leniency on CO2 emissions targets for automakers who utilize “green steel” primarily sourced from within the European Union. This strategy aligns with a broader EU discussion regarding a “Buy European” approach aimed at strengthening the competitiveness of European businesses in the global market.
The initiative, while presented as a mutually beneficial arrangement, raises concerns about potential distortions in the market and potential backlash from international trade partners. Critics argue it risks creating a two-tiered system, favoring companies that conform to the new requirements while disadvantaging those relying on cheaper, non-European-sourced materials.
Alongside this approach, the Ministry for the Environment is believed to have proposed increasing the taxes levied on vehicles with internal combustion engines to partially offset tax breaks currently applied to electric vehicles. However, this suggestion met with staunch opposition from the CDU and representatives of regional states, who deemed such a move impractical given the auto industry’s pre-existing struggles with declining sales.
Chancellor Friedrich Merz is hosting the auto summit, bringing together ministers, industry representatives, labor union leaders and state premiers to address the future trajectory of the German automotive sector, specifically the planned phase-out of combustion engine vehicles currently slated for 2035. While a complete reversal of this timeline is unlikely, participants anticipate a compromise that would allow for more flexibility in implementation, potentially including a continued role for hybrid technology.
State premiers, like Anke Rehlinger of Saarland, are advocating for a nuanced approach. Rehlinger emphasized the need to “enable the way” for the industry, suggesting that Germany should champion the allowance of hybrid vehicles beyond 2035 within the EU. However, she also stressed the crucial link between such concessions and commitments from automakers regarding job security and the preservation of German production sites. The summit’s outcome will be a crucial test of the government’s ability to navigate the complex interplay between environmental ambition and the economic viability of one of Germany’s most vital industries.