I guess the answer lies up the supply chain: Automakers have historically provided well-paid, cushy union jobs to their direct employees. However, that business model has increasingly depended on squeezing the supply chain. E.g. a relative used to work at a automotive supplier around 10 years ago — their blue collar workers got the 8.x€/h German minimum wage while employees at VW in the same region got 3x that plus an assortment of benefits.
At the same time, modern cars include a lot of electronics that aren’t even produced within the EU at all (and EV batteries are the worst bit here). Hence, European car manufacturers depend on products imported from China to create functionally and economically competitive cars. A trade war with China could upend that symbiosis.
(Fwiw, you’ll also notice that one of the union representatives at the end hints that they want government subsidies of some sort.)
Fwiw, you’ll also notice that one of the union representatives at the end hints that they want government subsidies of some sort.
That would be incompatible with EU common market although with the weight of France I guess rule bending is not out of question. This sounds like a viscous cycle though, trying to outspend China which has fiscal and monetary policy built entirely on stimulating domestic growth, at the cost of crazy capital controls.
There are lots of options for legal subsidies. Really, the only issue is whether you can legally specify that you only want to incentivize domestic production (like the IRA does in the US).
Just from my German context, I can name a couple of subsidies that have helped/are helping the car industry, particularly by making it a lot cheaper to own a (new) car:
The “diesel privilege” boosts diesel cars for extremely dodgy environmental reasons (you need a bit less diesel to go the same way than petrol …). To this day, the tax on diesel is lower than on gas in Germany. (Dieselgate is the indirect outcome of this: It happened as German car manufacturers started trying to export their domestically opex-reduced diesel cars to countries where owning a diesel car brought no opex benefit, while those countries tightened emissions standards.)
The “environmental incentive” was supposed to boost the automotive industry in 2009/2010 and allowed you to get paid for scrapping 9+ years-old cars.
The “company car privilege” allows for very low taxes on employer-leased cars.
The “environmental bonus” used to provide a subsidy for buying new electric/hybrid cars.
The “greenhouse gas reduction quota” allows you to sell the “saved” CO2 emissions of your electric car every year.
The “commuter’s lump sum” begets you income tax rebates if you use a car to travel to work.
I guess the answer lies up the supply chain: Automakers have historically provided well-paid, cushy union jobs to their direct employees. However, that business model has increasingly depended on squeezing the supply chain. E.g. a relative used to work at a automotive supplier around 10 years ago — their blue collar workers got the 8.x€/h German minimum wage while employees at VW in the same region got 3x that plus an assortment of benefits.
At the same time, modern cars include a lot of electronics that aren’t even produced within the EU at all (and EV batteries are the worst bit here). Hence, European car manufacturers depend on products imported from China to create functionally and economically competitive cars. A trade war with China could upend that symbiosis.
(Fwiw, you’ll also notice that one of the union representatives at the end hints that they want government subsidies of some sort.)
That would be incompatible with EU common market although with the weight of France I guess rule bending is not out of question. This sounds like a viscous cycle though, trying to outspend China which has fiscal and monetary policy built entirely on stimulating domestic growth, at the cost of crazy capital controls.
There are lots of options for legal subsidies. Really, the only issue is whether you can legally specify that you only want to incentivize domestic production (like the IRA does in the US).
Just from my German context, I can name a couple of subsidies that have helped/are helping the car industry, particularly by making it a lot cheaper to own a (new) car: