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The revival of the automotive sector

On 5th April four European automobile associations (ACEA, CECRA, CLEPA and ETRMA) published an action plan with 25 key actions to ensure a strong relaunch of the sector and the economy as a whole. The action plan is aimed at decision-makers at EU and national level and contains concrete recommendations for a successful way out of the corona crisis, taking into account the overall objectives of a digital and carbon neutral society.

One point, which is also included in the action plan, has been the subject of increased national and European discussion over the past month: purchase incentives or scrapping programmes (keyword: scrapping premium). In their action plan, the four associations emphasise that it is essential "to support the revitalisation of the automotive sector with immediate, targeted and coordinated EU programmes for the renewal of vehicles". EU Climate Commissioner Frans Timmermans said in a video call with EU lawmakers: "We see that the car industry is asking us to help them by helping households to afford a new car [...]. But why don't we do this through ecological scrapping schemes, by replacing an old and dirty car with a clean, even emission-free one?”

However, scrapping schemes do not have a good reputation and are sharply criticised from various quarters, both ecologically and economically. The German Federal Minister of Finance, Olaf Scholz, for example, has rebuffed the German car manufacturers for the time being, rejected a quick decision on state aid for the automotive industry and instead announced an economic stimulus package at the end of the month. In Germany, there had already been a scrappage scheme in the wake of the financial crisis in 2009. From an ecological point of view, the climate aspect must be considered above all. In order to meet the Paris climate targets, vehicles with fossile combustion engines must be replaced with cleaner alternatives in the medium and long term. Similarly, such purchase incentives would lead to the simple disposal of cars that are still in working order.

But a scrapping bonus is also controversial from an economic point of view. In an interview with, economist Claudia Kemfert of the German Institute for Economic Research said: "The results of the 2009 scrappage scheme were disastrous: at five billion euros, it was enormously expensive. It led to pull-forward and take-away effects and not to the desired economic effect. The price structures were permanently damaged [...]. These effects would not have helped the industry in the medium term.” Car purchases are also brought forward with a premium, which leads to a gap in the following years. The 2009 premium was also used to buy small cars, especially foreign ones. From a European perspective, however, this would not necessarily be a bad thing, as it would also benefit other European manufacturers and suppliers.

A premium should focus on the neutral promotion of sustainable mobility under the above-mentioned aspects. In the automotive sector, this should primarily promote clean or emission-free vehicles. Consideration should also be given to promoting people who share their car or use public transport, bicycles or local carsharing schemes instead.

Nevertheless, the automotive and supplier industry has been hit hard by the crisis and quick help is needed to protect jobs.



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