Hildegard Müller: 2021 will decide industry’s future in Germany and Europe

“2021 will be a decisive year for the future of industry in Germany and Europe: we are at a turning point that will determine the direction for the coming decades,” stressed Hildegard Müller, President of the German Association of the Automotive Industry (VDA), at the association’s virtual annual press conference.

“The entire German automotive industry continues to regard the corona developments with great concern. Our companies are doing everything they can to further reduce the risk of infection at their plants, in production and administration. The companies’ strategies are successful. The high safety standards of the automotive industry are effective in the production facilities.

“We believe that vaccine production and the vaccination program will now be greatly accelerated so that Germany can emerge from this crisis swiftly. Ordinary citizens, employees and the companies need a reliable perspective very soon.”

The VDA president underscored: “We assume that the second half of 2021 will bring improvements if there is enough progress with vaccinations to tangibly contain the pandemic in everyday life.”

Hildegard Müller pointed out that the sector was driving its transformation forward despite coronavirus. By 2025, the German auto industry will invest a total of 150 billion euros in technologies for the future, primarily in electric mobility and digitization.

The VDA president criticized suggestions of a continued lockdown or introducing more and more bans to achieve the climate targets. She said, “We can and wish to attain the climate goals – specifically not by shutting down large sections of social and economic life. Closing facilities for climate-related reasons is not an option for people in Germany, and not in Europe either. The response to the worries about the climate is not to have more and more bans and certainly not to give up growth and prosperity – which would jeopardize our social stability. Instead, it is to have technical innovations that enable us to achieve climate-neutral mobility. Europe needs this competition in innovation and an active industrial policy in order to reach the climate targets and simultaneously secure both growth and employment.”

Hildegard Müller added, “We are working on such new offers and alternatives and putting them on the roads. We are creating the new mobility that everyone is talking about. Our sector has achieved a great deal in this field. We are European champions in e-mobility. The German automotive industry is way ahead when it comes to patents in e-mobility. And we are leaders in the other areas, too: in research and development, powertrains, batteries, hybrids, digitization, autonomous driving, improving the piston engine and in reducing exhaust emissions. I consciously say ‘piston engine’ because it is not combustion that is the problem, but the fuel and its origin, and therefore we also need synthetic fuels. We invented the car, and now we are re-inventing it. The companies in the vehicle industry are carrying out research and development in all fields.”

“Entering into new trade agreements such as the one with the UK, or the Comprehensive Agreement on Investment between the EU and China, is the right way to go.” But the new Chinese trade zone in Asia and the dominance of US platform industries mean that Europe will have to improve its position in international competition, according to Hildegard Müller. “The yardstick for all economic-policy decisions must always be the global market.”

The VDA president stated that the European Commission had a huge responsibility here: “The new trade regimes open up new opportunities that we have to exploit. And that requires good regulatory conditions for our industry, which are mostly determined in Brussels.” She indicated, however, that right now developments were going in the wrong direction.

She drew attention to the EU’s new mobility strategy with its strong focus on e-mobility in almost all modes of transport, even though a Europe-wide charging network is still lacking. “At this time, 75 percent of the charging infrastructure in the EU is located in just three states – the Netherlands, Germany, and France – and only for passenger cars. The network for trucks is practically non-existent.”

Hildegard Müller explained that the EU’s mobility strategy has to be expanded during the coming months – to include synthetic fuels and the expansion of a hydrogen infrastructure so that traffic can continue to flow. “We must also assume that the European Commission will not only formulate targets, but will also take implementation in hand. Otherwise the trade agreements won’t be of any benefit.”

Ms. Müller continued by saying, “The laws and regulations for the Green Deal will be drafted during the next few months. I hope that Germany will play an active role despite beginning to move into election mode. There won’t be any point in discussing tightening up the climate targets – both the general climate target of 55 percent and potentially stricter fleet limit values – unless the EU finally delivers the promised honest and painstaking comprehensive economic and social impact assessment, and also creates the necessary charging infrastructure for e-vehicles.”

The European Commission also had to revise its proposal for Euro 7, Ms. Müller explained. “If a new vehicle has to satisfy the same limit values in winter when starting or towing a trailer uphill as it does when doing 50 km/h on a straight road, that will practically amount to banning piston engines. The idea aims to reduce nitrogen oxides, but in fact it will generate far more nitrogen oxides and CO₂, because old vehicles will remain on the market for longer if new ones are in effect banned. There has to be a re-think so that we really can reach the climate targets together,” the VDA-president stressed.

Hildegard Müller pointed out that the conditions in Germany are in urgent need of improvement. German labor costs and taxes on profits are above the average. Furthermore, Germany has the highest energy costs of any country in Europe except the United Kingdom. Broadband internet access is worse here than in Thailand, Romania, Hungary or Spain. Mobile communication is in similar need of improvement. To add to this there are the significant bureaucracy and poor digitization of public administration which, Ms. Müller explained, slow procedures down and thus impede productivity.

Hildegard Müller emphasized, “The German automotive sector is better equipped for the future than the country’s industry in general. So policy-makers should take the necessary steps to keep and support production and jobs in Germany. The big topic of 2021 will therefore be Germany as an industrial location, and how we can improve the conditions here.”

In 2021 the VDA expects growth of around 8 percent on the German passenger car market (compared with 2020) to 3.15 million units. However, Hildegard Müller pointed out that last year’s level of 2.9 million cars was very low. She added that in 2021 the German car market would remain far below the annual figure of approx. 3.5 million new registrations in the period from 2017 to 2019. Growth in heavy-duty commercial vehicles is expected to be 15 percent, to over 78,000 vehicles.

The corona crisis in 2020 had also had massive impacts on the international markets, Ms. Müller said. Sales had fallen, in some cases drastically, in nearly every country in the world. A gradual recovery on the markets could be expected in 2021. “However, this will not compensate for the falls during 2020. So unfortunately there is no reason to give the ‘all clear’,” Hildegard Müller said with particular reference to the supply industry.

With the exception of China, vehicle sales on the various markets will only make slow progress toward their pre-crisis levels. The VDA expects the European market to increase by 12 percent in 2021 to 13.4 million cars. Sales in the US may be expected to add 9 percent this year and total 15.8 million light vehicles. In contrast, the Chinese passenger car market will exceed its pre-corona level by recording 21.4 million units (+8 percent). Hildegard Müller stated, “The global passenger car market may therefore be expected – after collapsing by 15 percent last year – to grow by 9 percent in 2021 to 73.9 million new vehicles. But even this volume will still be a long way below the pre-corona figure.”