State-backed incentives unpopular with German taxpayers

13 May 2020

Any incentives for new-car purchases in Germany, designed to boost the industry in the wake of the coronavirus (COVID-19), will face opposition from the public.

This is the finding of an ARD Deutschlandtrend survey, which shows that 63% are against government-backed incentives when buying a car, while just 12% are in favour. A further 22% believe that any scheme should only be for low and zero-carbon vehicles.

Automotive is one of Germany’s biggest industries, and it is also one of the hardest hit by the COVID-19 lockdowns. Manufacturing virtually ceased across Europe in March and April, while sales have also plummeted. Carmakers have reported losses in their Q1 2020 results, due to the lack of sales, and such deficits will take time to recoup.

Decision pending

During a conference call with representatives of the automotive industry earlier this week, chancellor Angela Merkel discussed measures to stimulate the German economy during the COVID-19 crisis. Decisions are expected in June, and this will likely include details around state-backed incentives, which may include a ′scrappage’ portion.

The survey asked whether voters would back plans to use state funds to reduce the purchase price of new vehicles after the automotive industry called for such a move. In recent days, there has been much negative press around the plans, with some media outlets in the country questioning why taxpayer money should be used for someone else’s purchase.

Germany’s motor authority, the VDA, believes that the country’s automotive industry will need help following the COVID-19 pandemic, with consumers unlikely to be in a position to purchase vehicles.

′There is currently no reason for optimism. Economic support measures will likely be necessary in order to revive overall economic demand and, in particular, the demand for vehicles,’ Hildegard Mueller, president of German automotive industry association VDA said last month.

Dealer offers

As dealerships in the country reopen, manufacturers are hoping for ′pent-up demand’ to help sales increase. However, with consumer finances having taken a hit over the last few months, and uncertainty over the damage a potential second-wave of infections may inflict, they may face a struggle in the comingweeks and months.

Therefore, incentive schemes, whether government or manufacturer-backed, are likely to be launched in the near future. Volkswagen (VW) has already made its move, offering customers the ′#vwfÜreuch’ programme, an all-in package for leasing and financing. From a monthly payment of €9.99, the package includes payment protection insurance in case customers lose their job as well as maintenance, inspections and an extended warranty for the entire term of the contract.

′With this Germany-wide initiative, we want to provide strong initial impetus to attract customers back to dealerships,’ says JÜrgen Stackmann, Board Member responsible for Sales, Marketing and After-Sales of the Volkswagen Passenger Cars brand. ′According to market research institute GfK, consumer sentiment has reached a historic low in April. We need instant measures that have a positive effect on the consumer climate.’

The #vwfÜreuch programme is available for new and used car sales from May 15 to July 31 and is being backed by a major advertising campaign.