EU faces intensified advocacy from Merz regarding the transition to electric cars
In a significant development at the IAA motor show in Munich, Germany's conservative leader Olaf Scholz (Merz) made an appeal for a more flexible approach to the European Union's (EU) plan to combat climate change, particularly the 2035 target for banning the sale of new combustion engine cars.
Merz, who is planning to host meetings with key auto sector players to chart a way forward, did not openly criticize the EU's deadline but expressed concerns about the rigidity of European regulation. His comments sparked criticism from his center-left coalition partners, the Social Democrats (SPD), with SPD lawmaker Armand Zorn stating that questioning the phase-out of fossil-fuel combustion engines jeopardizes the long-term competitiveness of the country.
The auto sector in Europe is currently facing a stuttering shift to electric vehicles (EVs), with sales growing more slowly than anticipated. This shift has led to job losses, with more than 50,000 jobs shed over the past year in Germany alone. Major German automakers like Volkswagen, BMW, Mercedes-Benz, Stellantis, and their suppliers are not immune to these challenges, with Volkswagen planning thousands of layoffs in the coming years and companies like Porsche and Audi also cutting jobs.
The EU's plan has also faced criticism from other automakers, with Volkswagen, BMW, Mercedes-Benz, Stellantis, and other European and US automakers voicing concerns about the EU's climate change plan. They argue that unilateral political commitments to specific technologies are the wrong economic policy approach.
However, more than 150 businesses in the EV sector have written an open letter urging the EU not to delay the 2035 target. This appeal was made as European automakers are struggling to build competitive EVs, with Chinese EV makers like BYD presenting competitive models at the IAA fair. BYD's compact Dolphin Surf model, which has been on sale in Europe since May for around 20,000 euros, will be produced in a new facility in Hungary later this year to avoid EU tariffs on Chinese imports.
In response to these challenges, Merz and Bavaria's leader Markus Soeder are planning to develop proposals focused on strengthening Germany’s position in the automotive and production sectors. These proposals aim to support the transformation toward electric vehicles, secure supplier revenues for climate-friendly components, promote workforce retraining for new vehicle production, increase investment in research and development, and advocate for improved political and regulatory framework conditions to ease this transition and maintain Germany's industrial leadership.
Merz also stated that he wants to achieve climate protection as cost-effectively as possible through technological openness. This approach is in line with Soeder's belief that combustion engines still have a future and that electric mobility will prevail in the long term, but more time is needed to organize the transition in Europe.
The IAA motor show also saw a significant increase in Chinese participation, with around 100 of the 700 companies taking part in the show being from China, up 40 percent from the last show in 2019. This trend is expected to continue, with fourteen Chinese carmakers displaying new models, as opposed to just ten European ones.
As the auto sector navigates these challenges, it is clear that a more flexible and market-based approach to climate regulations will be crucial to safeguard jobs, innovation, and Germany's position as a global leader in the automotive industry.
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