Measures to curb the movement of people, imposed to contain the spread of the virus, have hit car sales hard, leading Germany’s Volkswagen (DE:VOWG_p) on Thursday to abandon its full year outlook and issue a profit warning.
As Germany prepares to ease lockdown measures which will allow car dealerships to reopen, lobby group VDA said demand needed to a boost.
“There is currently no reason for optimism. It is likely that economic support measures will be necessary in order to revive overall economic demand and, in particular, the demand for vehicles,” Hildegard Mueller, president of German auto industry association VDA said in a statement on Thursday.
How such incentives should be structured and funded depends on how well demand rebounds after Germany loosens lockdown measures, Mueller said.
“We will only be able to estimate what is actually necessary once the car dealerships have opened. Then we will see how customers will behave.”
Politicians and the auto industry need to act in a timely fashion, she cautioned. “It will be too late to talk about possible demand impulses in autumn.”
Mueller’s remarks, made on Wednesday and published by the VDA on Thursday, follow calls for state aid made by Bavarian premier Markus Soeder on April 8.
At the time, he called for a cash-for-clunkers scrappage scheme to boost low emission cars, an idea which was immediately endorsed by BMW’s Chief Executive Oliver Zipse.
“We need to have another very specific discussion about how we can strengthen the automotive sector. And I think it is necessary to develop a model similar to the scrappage scheme in order to give a massive boost to domestic demand,” Soeder said, adding that measures were needed to boost demand for low emission vehicles in particular.
“Let’s be quite honest, all the new engines have not yet been as successful on the market as we thought. Now is the chance to start a project in which we can promote cars in Germany with an innovation premium.”
Stephan Weil, the premier of Lower Saxony, the German state which owns a 20% stake in Volkswagen, this week told Hannoverschen Allgemeine Zeitung that the country needed an “eco scrappage scheme” to boost demand for electric and hybrid cars.
Tobias Austrup, a transport specialist at environmental lobby group Greenpeace, also welcomed the idea.
“It is good that Weil and Soeder link any state aid for the car industry to ecological progress this time. If all taxpayers make this money available, then everyone must benefit from it – for example through better air, less climate damage and secure jobs.”