Government's E-Car Bonus: Kretschmer Addresses Trust Lost in Politics
In response to the government's decision to end the purchase premium for electric vehicles (EVs), Michael Kretschmer, the Minister President of Saxony, expressed concerns about potential damage to the trust people and businesses have in politics. "Politics thrives on trust," Kretschmer, a prominent CDU politician, told the German Press Agency.
The Minister President expressed his concerns during a meeting in Dresden, the capital city of Saxony. He believed that the high energy prices in Germany, among other factors, were making the advantages of EVs less appealing. This, he said, was having a negative effect on the industry.
Despite the challenges, Kretschmer celebrated the creation of a lead plant for e-mobility in Zwickau, which he viewed as a unique selling point for Saxony. Volkswagen operates the plant, and Kretschmer was optimistic that the company could master the current weakening demand for EVs.
However, the situation is problematic for many medium-sized supplier companies in the region, due to factors like increased tolls and the planned CO2 tax, among others. Kretschmer expressed particular concern for companies in the Ore Mountains, which would be disproportionately affected by these factors.
Volkswagen has announced plans to continue job cuts at its Zwickau plant in 2024. This is largely due to a weakening demand for EVs. The company has not yet extended the contracts of nearly 500 temporary employees, building on the expiration of 269 employee contracts in 2023. Almost 10,000 people are employed at the Zwickau site.
Insights
- The decision to end subsidies for EVs has led to a sharp decline in EV sales in 2024, with a 18% drop in Germany compared to the previous year. This is a reflection of the economic impact on the industry, which is grappling with rising energy costs, labor expenses, and increasing competition from China.
- The sudden withdrawal of subsidies has contributed to public dissatisfaction with the government's handling of the automotive sector. This dissatisfaction can erode trust in the political leadership, particularly as the economic crisis deepens and jobs are at risk.
- The decision to end subsidies has exposed weaknesses in the industry's transition to electric vehicles, particularly in battery technology, where Germany lags behind global competitors. This instability can further undermine trust in the industry's ability to adapt and thrive.
- The political fallout from the economic crisis is having a direct impact on Germany’s political landscape. Chancellor Olaf Scholz’s Social Democratic Party (SPD) is struggling in the polls, and far-right Alternative for Germany (AfD) has gained momentum, fueled by public dissatisfaction with the economy.
- German mayors, representing cities deeply tied to the automotive sector, have sounded the alarm over the economic fallout from EU policies and the transition to EVs. They warn that up to 600,000 jobs are at risk and threaten the economic stability of key manufacturing regions unless Brussels rethinks its approach.
- In response to these challenges, the European Union is preparing bloc-wide purchase incentives for electric vehicles to support struggling carmakers. German Chancellor Olaf Scholz has called for harmonized Europe-wide purchase premiums for e-cars, which could help stabilize the industry and boost demand for EVs.
