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German Manufacturers Ride Out Harsh Election Rhetoric

German Manufacturers Ride Out Harsh Election Rhetoric.

Leadership Criticised, But So Far No Harmful Action Proposed.

Merkel Says Diesel Tax Breaks Remain For Time Being.

The German election campaign has exposed auto manufacturers to political winds, and after some remarks interpreted as reassuring from Chancellor Angel Merkel, she then caused palpitations by saying it might be an idea to borrow the idea pushed by Britain and France and ban the sale of traditionally powered vehicles by 2040.

So far though, reaction by the stock prices of Volkswagen, BMW and Mercedes parent Daimler has been limited.

Merkel restarted her campaign in the middle of August with some harsh words about industry leadership linked to the diesel issue, describing it as a betrayal of trust, but she refrained from suggesting action.

The industry is also under pressure because of a cartel investigation, while VW’s protected political status is being questioned. 

Merkel, leader of the right of centre Christian Democratic Union (CDU) and strongly favoured by opinion polls to return to office after the election September 24, held back from urging more action that might penalize diesel engines, which form a big part of the industry’s strategy to meet tough fuel consumption rules which kick in by 2020.

Merkel’s main opposition, the left of centre Social Democratic Party (SPD) also joined in the criticism of the auto industry. SPD leader Martin Schulz said the industry hadn’t planned seriously for the future, but made no concrete proposals

No electric quota
Merkel also held back from imposing a quota for electric car sales. Earlier this year Merkel withdrew an ambitious but failing ambition to have 1 million electric cars on German roads by 2020.

But in remarks a couple of days later, Merkel conceded that the days of the internal combustion engine might be numbered.

“I don’t want to name an exact year, but Britain and France plans to phase out internal combustion-driven cars by 2040 were the right approach,” Merkel was quoted as saying in the SUPERillu magazine.

But the industry must have breathed a sigh of relief when Merkel said tax breaks favouring diesel cars would remain in place for the time being, since they emitted less carbon dioxide than petrol.

Merkel’s earlier remarks must have stung.

“Large sections of the auto industry have gambled away unbelievable amounts of trust. This is trust that only the auto industry can restore. And when I say ‘the industry’ that is the company leaders,” Reuters quoted Merkel as saying.

The German manufacturers have agreed so-called “scrappage” schemes, hoping to persuade owners of older diesels to replace their vehicles with the latest, much cleaner diesel engines.

If that wasn’t enough for investors to worry about, in July, the German cartel watchdog confirmed it was investigating reports VW, Mercedes’ parent Daimler, and BMW might have colluded illegally to fight off competition. VW meanwhile is reeling from local political developments in its home state of Lower Saxony. An election called for October 15 could end Lower Saxony’s control of VW, long criticised by investors as making Europe’s biggest car company overmanned and inefficient.   


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