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One after another, the CEOs of two automakers who spoke in Hungary are optimistic about the prospects for the auto industry. According to company executives, no more state subsidies are needed for the sector to recover from the shock caused by the crown crisis; Four months ago, they were still kneeling at Uncle State’s feet.
A turning point is taking place in German car manufacturing: the sector, which not long ago begged for special state support from the Berlin government, from which it was more or less expelled, now sees a nice thanks for not asking for money from taxpayers, according to an article in the Financial Times.
Volkswagen CEO Herbert Diess told the British business newspaper that they would stop pushing because they see that if there is not yet a full economic quarantine on the second wave of the coronavirus epidemic, they don’t need any more help.
Although the EU car market contracted by almost 30 percent in the months to 2020 compared to the same period in 2019, VW’s sales in Europe grew by more than 10 percent in September (selling 300,000 cars), while that in China, the automaker’s largest domestic market, achieved a one percent increase in 2019 compared to September. At Volkswagen’s general meeting in September, shareholders received good news that the company will continue to be profitable in 2020 thanks to the order boom in the latter phase of the year.
Targeted grants have worked
Governments across Europe have introduced many specific subsidies to help buy electric cars and plug-in hybrids, and they have worked, the CEO said, referring to state subsidies introduced in the first phase of the pandemic.
The good news for the Hungarians is that it has not only changed its previous views on state aid, but also the management of the other major German automaker, Daimler, which is involved in Hungary. Ola Kallenius, CEO of the company, made a similar statement when the Daimler numbers came out. Based on this, net profit rose 20 percent to almost 2.2 billion euros in the third quarter from a year earlier, largely because Chinese sales rose more than 23 percent during this period. Kallenius characterized the data as almost too good to be true.
Turn
The leaders’ statements show an important change compared to the fact that in June the Berlin government was still being asked for comprehensive government support for the auto industry. It was felt that the € 5 billion bonus for new vehicles that taxpayers had raised in the industry during the 2008 financial crisis should be repeated. This helped companies achieve record sales.
Dies has come under fire for his television statement in April this year after pushing to help sell cars equipped with conventional internal combustion engines, while many believed that the economic crisis provided an opportunity to push technology that emitted less or no escape. Additionally, the state helped retain Volkswagen employees under the Kurzarbeit scheme by taking over part of their salaries.
It was not a smart move on their part to ask for money in Berlin, while VW planned to pay more than two billion euros in dividends to its shareholders, a source close to the company’s investors told the Financial Times. Monika Schnitzer, the government’s economic adviser at the time, spoke that the country’s automakers were in good shape, and it would be a mistake to try to stimulate the economy by relying only on them. That is why the government has decided to support only the sale of electric cars and reduce the Mehrwertsteuer, that is, the VAT.
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