VDA’s New Year Reception with 650 guests – challenges from US trade policy and Brexit –
10-point plan presented
Around 600 high-ranking guests from politics, business and academia attended the New Year Reception of the German Association of the Automotive Industry (VDA) in Berlin. Alongside Federal Transport Minister Alexander Dobrindt (who also spoke as guest of honor), they included many state secretaries and members of the German Bundestag, plus ambassadors and envoys from France, the United Kingdom, Austria, Spain, Portugal, the Czech Republic, the Slovak Republic, Poland, Hungary, Ukraine, China, Brazil, Argentina and Colombia. Many members of the VDA’s Managing Board were also present: Dr. Daniel Böhmer (Meiller), Dr. Elmar Degenhart (Continental), Gunnar Herrmann (Ford), Arndt G. Kirchhoff (Kirchhoff), Gertrud Moll-Möhrstedt (Akkumulatorenfabrik Moll), Dr. Karl-Thomas Neumann (Opel), Andreas Renschler (VW), Gero Schulze Isfort (Krone), Dr. Stefan Sommer (ZF), Prof. Rupert Stadler (Audi) and Dr. Stefan Wolf (ElringKlinger). The statement delivered by VDA President Matthias Wissmann at the VDA’s New Year Reception in Berlin is reproduced below.
German passenger car makers have quadrupled US production since 2009
Just a few days ago Donald Trump became the 45th president of the United States – and it is not only the German automotive industry that has to get used to a new situation. Foreign and security policies at least, and probably trade issues as well, will be have to be readjusted following the new US president’s inaugural speech in front of the Capitol on Friday. We take his pronouncements seriously. At the same time, we will analyze facts that are as yet uncertain at the appropriate time and will not engage in speculation. There is no doubt that if restrictions are introduced in NAFTA, initially they will severely hold back the US economy. But international trade would also be affected.
For the German vehicle makers, the United States is not only the second largest export market, but also an important production location supplying the global market. Over the last seven years, we have quadrupled our light vehicle production in the US to 850,000 units. More than half of all vehicles built there by the German OEMs are exported. This shows that the US has close ties with the rest of the world and cannot have any interest in us tending toward protectionism. The German suppliers have greatly increased the number of facilities they have in the US. That is a clear commitment to the US as a business location.
The German automotive industry directly employs 110,000 people in the US, 77,000 of them at suppliers. There are several hundred thousand indirect employees, e.g. in trade and in workshops. If the US introduced import duties or import taxes it would be harming itself in the long term. Those looking only at the automotive trade balance do not see the overall picture. Market shares are more informative. For example, in the US the German manufacturers take 7.6 percent of the market (8.0 percent last year). Conversely, the subsidiaries of Ford and GM have had their own production here in Germany for many decades, and their market share is in double figures. Furthermore, the chairmen of Ford and Opel are valued colleagues on the VDA’s Managing Board.
On both sides of the Atlantic it is true that the tough international competition and global value chains make it crucially important to have good trade relations – and direct investments – when it comes to economic growth and jobs. One thing is quite clear to me: we must promote the advantages of global free trade even more convincingly all over the world. Protectionism has never yet provided a lasting solution to an economic problem anywhere in the world.
Britain is the most important export destination for the German automotive industry
Of course Britain is also a cause for concern. The “hard Brexit” announced by Prime Minister May harbors considerable risks – for the UK and for the whole of the EU. More than half of British passenger car exports go to the European Union. And the German automotive industry exports more cars to the UK than to any other country – in 2016 the total came to around 800,000 new cars, i.e. almost one fifth of our entire passenger car exports. Furthermore, we have production plants in the UK. So we have very close ties.
In the view of the German automotive industry, everything possible must be done to continue the unhindered exchange of goods and services between Britain and the other EU countries in the future. But the clear priority is that the 27 EU Member States have to stand together. And Brussels must draw the correct conclusions from the British vote. Our common Europe must become more attractive for its members. Less EU regulation is now more Europe. We need greater transparency and genuinely better regulation.”
Moreover, the tasks and burdens in the EU have to be shared out appropriately. I would therefore like to add: however important the United Kingdom is to us as a market, the cohesion of the EU-27 and their single market are even more important to our industry.
World passenger car market will grow to 85 million in 2017
This brings me to the results from the automobile markets. The automotive year 2016 was a good one overall: both the US market (17.5 million light vehicles) and China (23.7 million passenger cars) set new records, while Western Europe added 6 percent to reach 14 million new vehicles. We are pleased that the world passenger car market will continue to grow in the current year – to nearly 85 million units. The domestic passenger car market totaled around 3.4 million new registrations in 2016, which was the highest level since the beginning of the decade, with employment at home actually rising to a 25-year high (815,000 employees). Our manufacturers have a market share of 70 percent in Germany, while in Western Europe they take 50 percent and in China 20 percent.
On the offensive with 10-point plan – electric mobility and digitization – internal combustion engines still necessary – last “projects” in exhaust emissions completed
The German automotive industry needs to have the policy-makers at its side if it is to maintain its competitive international position in the future. It is becoming more and more apparent that given these “disruptive times,” the companies are going on the offensive with a comprehensive strategy that can be summarized in ten points:
By 2020 the manufacturers will more than treble their range of electric cars – from the current 30 to nearly 100 models. In 2019 electric drive will be present in practically all series, in the form of plug-in hybrids or purely battery-driven vehicles. Second, the German automotive industry will invest over 40 billion euros in alternative powertrains by 2020. This represents a huge effort, because these billions have to be generated by current business, that is, the sales of cars with internal combustion engines. We cannot – as some people outside the industry suppose – simply wave good-bye to a particular drivetrain. This is not a nationalized industry that the state will always bail out with injections of fresh money. It bears responsibility for many hundreds of thousands of employees. It will depend crucially on how the markets develop worldwide. But one thing is certain: customers do not dance to the tune of economic planners.
Third, in parallel to electric mobility, development of classical powertrains will continue. Reductions in consumption of 10 to 15 percent are possible. We are convinced that gasoline cars and diesels will still be needed. The global market for passenger cars will increase to 91 million new vehicles by 2020. This means that sales of cars with internal combustion engines will rise, even if the proportion of electric vehicles grows more strongly. The German manufacturers are also sending out a signal in respect of the electric charging infrastructure. Together with the Ford Motor Company, the makers BMW, Daimler and Volkswagen with its Audi and Porsche brands are planning a joint venture for an ultra-fast high performance charging network on European freeways. The first step is set to include 400 sites.
Fifth, we are finishing up the last “projects” in exhaust emissions. From 2017, more and more passenger cars with a direct-injection gasoline engine will be equipped with a particulate filter. This will resolve the problem of particulates from gasoline cars, which was eliminated in the case of diesels many years ago – with filters as standard. On the diesel front we are pushing the introduction of the latest SCR exhaust technology. By the end of 2019, 80 percent of newly registered diesel passenger cars will already operate with SCR, and at the beginning of the next decade it will be in almost all newly registered diesel cars. This means that the nitrogen oxide issue will finally be laid to rest.
Synthetic fuels may bring “second spring” for combustion engines
Seventh, we are backing petroleum-independent synthetic fuels. They can ensure CO2-neutral mobility even with combustion-powered vehicles, because these fuels bind just as much CO2 during their production as they release when they are burned. The costs of such fuels are still high, but a “second spring” for combustion engine vehicles is certainly possible. Eighth, we are investing 16 to 18 billion euros in digitization – which alongside electric mobility is the second large innovation trend – during the next three to four years. Ninth, the German automotive industry is already the world champion in patents for connected and automated driving. It holds 58 percent of all patents issued worldwide in this field since 2010. We wish to further expand this lead.
Furthermore, tenth, we are developing innovative concepts for urban mobility, to make it more environmentally friendly, safer, more reliable and more efficient. In this field, the German automotive industry cooperates with selected towns and cities. In addition the German OEMs are expanding their car-sharing schemes at both national and international level.
Germany needs an “industry timetable”
The size of the offensive only becomes clear in an overall view. Yet it will only be successful if politicians prepare the way instead of blocking it, and if Germany again works on becoming more competitive. Alongside a climate protection plan, more than anything else Germany needs an “industry timetable” that safeguards and expands its competitiveness on a global scale. And that also applies to Europe.
We urgently need a balance between climate protection and industrial policy. Germany is an industrial nation, and many envy us for it. If we want to keep this position, climate policy must not remain the sole objective of policy-making. And it should certainly not be tackled by one country going it alone; the solution can only be found in an international approach.
We need a reasonable trade-off between climate policy and industrial policy, a policy with moderation, and with a view to employment. Banning combustion engines does not feature in it, and neither does a “quota system” for electric cars as demanded by the Federal Environment Minister.