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German Election Unlikely To Provide Required Auto Industry Shakeup
The results of the recent German general election are unlikely to bring about the significant changes needed by the country’s automotive industry. Despite chronic issues facing the sector, including weakness in China, threats from Chinese imports into Europe and President Trump’s promised tariff war, investors can breathe a sigh of relief as there will be no drastic overhaul.
The Christian Democrats (CDU/CSU) and the left-of-centre SPD have failed to propose any specific measures to stimulate the industry. The CDU/CSU had previously withdrawn subsidies for electric vehicles just over a year ago, leading to a decline in Germany’s EV market. It is unlikely that new subsidies will be introduced.
Friedrich Merz, likely to become the next Chancellor of Germany, has taken a pro-business stance and opposes excessive bureaucracy. However, this approach does not address the industry’s global challenges, including its loss of share in China and Chinese imports into Europe and the US tariff risk.
Experts believe that there will be no government funding available for the auto industry, which will continue to focus on energy price stability and competitive prices for energy-intensive industries. The CO2 emissions targets may see a slight shift with the CSU back in power, but it is unlikely to have a significant impact.
The German Automotive Association (VDA) has urged the formation of a stable government as quickly as possible, emphasizing the need for reform within Germany and a unified voice in Europe. This sentiment will likely be shared by investors who are aware that this process can take months, not days.
It appears that there will be no significant change or stimulus provided to the German automotive industry following these elections.
