Rhein on Energy and Climate

After years of booming sales and profits the European automobile industry finds itself confronted with a “consumer strike”, forcing manufacturers to temporarily close down plants and send their personnel into unpaid vacations.
In view of the high market saturation in most European countries this situation was overdue and the steep decline of sales in the USA should have warned manufacturers already months ago.

The car industry is widely regarded as pivotal for the economy; tens of thousands of small and medium-size companies throughout Europe depend on a high turnout of cars for their level of employment and profits.

It is therefore not surprising for the European Association of Car Makers to knock at the door of governments and the EU and ask for help. Nor is it surprising to see governments eager to intervene.

Three types of support are presently under discussion at EU level and in certain member states.
• A big loan facility, some € 40 billion are being requested, to help the industry develop low-emission cars.
• Fiscal exemptions for the purchase of new cars in 2009.
• A softening of the EU regulation for C02 emissions, 130g/km, as of 2013.

The decline of sales in 2009 cannot justify any further softening of the fuel-efficiency standards – 130g C02/km – which car makers will have to comply with as of 2013 under the proposed EU regulation. EU legislators should ignore the clamour coming from an industry that has far too long delayed the introduction of more fuel-efficient vehicles and failed to respect voluntary engagements taken to that end.

Fiscal exemptions for the purchase of new a car in 2009 may give a very temporary boost to sales. This is not a very intelligent way of helping an industry! And why not also offer similar incentives to other sectors. After all, Europe will face a general stagnation of growth in 2009!

A loan facility might be offered, e.g. through a credit line from the EIB. But it must be given at market terms. There cannot be any question of subsidising such a loan from the EU budget.
The EU has just released a big amount from its research budget for the development of super- efficient engines, based on hydrogen and fuel cells at the horizon beyond 2020. Car makers should be able to finance the development of 130g C02/km cars in 2013 without any public subsidies.

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