"Due to limited flexibility for the first two options with given austerity, technology funding seems to be more feasible and sustainable than direct consumer incentives."
PA'S thomas goettle, automotive expert
PA's automotive expert, Thomas Goettle, is interviewed by China Radio International on the English programme, "People in the Know." Thomas provides his point of view about the effect of the economic recession on the European and global auto markets and the business strategies of European automakers as they strive to make profits in the current economic and environmental climate.
Regarding the effects of austerity in European countries, Thomas says: "Under the circumstances given, there is almost no option beside austerity although hindering or slowing down growth potential, particularly in countries such as Spain, Italy, Greece, Portugal, partly France. However, we also see positive examples such as Ireland, UK and Germany with still healthy economies but expecting future problems, due to dependency on external trade relations."
Thomas goes on to explain: "The combination of saturated markets and austerity measures would hit the automotive industry in terms of decline in sales figures, capacity adjustments, plant closures and partly job losses in southern Europe, but also in Germany or France, for example.”
Thomas continues: "Given that, there are two fundamental options for policies particularly for innovative powertrain and environmentally friendly cars: direct subsidies / tax incentives on consumer end, or funding for technology development on car maker / supplier end (or even protective policies for import cars with worse environmental impact). Due to limited flexibility for the first two options with given austerity, technology funding (German model) seems to be more feasible and sustainable than direct consumer incentives (French example)."
Thomas notes that the French reaction with publicly funded rebates could have short term impact on their car makers by creating some consideration and maybe demand on consumer end, "but for how long could government afford this and after its end sales were declining again?"
Thomas continues to explain that such subsidies are expressions of still rather protective (national) automotive markets and in this way not the right solution in terms of long term impact and true competitiveness. At the same time, the segment of environmentally friendly cars is not providing the big market push for boosting sales and hence production levels, i.e. EV market share in Europe remains below 1% at the moment.
Additionally, Thomas discusses German cars' success in China, such as BMW, VW and Daimler benefitting from good market understanding and patience within joint ventures to position tailored platforms as the right kind of premium to the growing mid and upper class in Chinese metropolitan areas. Thomas shares his point of view on the competitiveness of the Chinese car companies on the global market, still suffering from lack of safety and quality as well as a technology gap: "There is room for improvement around safety, quality, technology, design - as Hyundai showed as best practice example - and finally local presence, when entering European markets through collaboration, as tried with Volvo and maybe Opel as a new target."