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Germany’s Angela Merkel Looks To Electrification As Future Of German Auto Industry

German Chancellor Angela Merkel is cranking up the pressure on the German auto industry as it seeks to reorganize coming out of the diesel emissions scandals that shook its foundations. The strong push comes as Merkel seeks re-election and has recognized the mounting global market pressures that are coming to bear on the largely internal combustion–based German auto industry.

German Chancellor Angela Merkel is cranking up the pressure on the German auto industry as it seeks to reorganize coming out of the diesel emissions scandals that shook its foundations. The strong push comes as Merkel seeks re-election and has recognized the mounting global market pressures that are coming to bear on the largely internal combustion–based German auto industry.

In her latest statements, Merkel has for the first time floated the idea of bans on petrol and diesel vehicles. This is a significant step in an EV direction that could lead to massive changes in the German auto industry. In particular, she stated that “a ban of ICE cars could be an option.” Such policy would not come till October — after the election — but the change in rhetoric was surely not taken lightly.

Merkel also slammed the German auto industry for past actions to deceive regulators and consumers, and she put the pressure on them to clean up their image through genuine change.

“Large sections of the auto industry have gambled away unbelievable amounts of trust,” she stated in her speech in Dortmund. “This is trust that only the auto industry can restore. And when I say ‘the industry’ that is the company leaders.”

The crowd rewarded her with strong applause.

The question raised by Merkel’s renewed interest in the electrification of the German auto industry is whether or not her interest in electrifying German personal transportation is purely a ploy to get re-elected on September 24th or if it is a genuine concern in response to mounting global market pressures as consumers migrate to luxury electric vehicles*. With the German automobile industry dominated by luxury auto companies like Mercedes-Benz, BMW, and Audi, this is perhaps the portion of the global auto market most facing existential threat right now from Tesla and a quick trend in favor of premium electric vehicles.

The push may has less to do with setting the German auto industry up as a leader in combatting climate change or in setting new standards for air quality and more to do with simple economics. With 900,000 Germans directly employed in the auto industry and global markets set to pivot to electric vehicles rapidly over the next 5 years, it seems Merkel is, in all actuality, largely making an economic play — after years of delay in pushing the industry to move to zero-emissions models. Fortunately for the rest of the world, her ploy just happens to be in line with what the planet needs*.

Politics operate differently in Germany than they do in the US, as Merkel is not in the pockets of the German auto industry and can enact regulation that will force the turning of the rudder, causing the entire industry to pivot towards electrification.

However, she is not alone in her push for the electrification of the automotive industry, as the opposition candidate has also announced a carefully crafted plan to overhaul the German automotive industry, including specific production quotas for electric vehicles, something recently promoted by Germany’s deputy economy minister, Matthias Machnig. Merkel’s plan takes a different approach but both address the fact that the industry needs to pivot in a new direction.

As we all know too well, though, what is said on the campaign trail often stays on the campaign trail. We’ll have to wait to see what policies are enacted … once we see who wins the election next month.

*James Wimberley highlights that this is less likely a political ploy than a real shift in policy intentions:

“Merkel is headed for an election victory that will leave her in a stronger position than before vis-a-vis her junior coalition partner in the SPD. The latter are rooted in the labour movement, and defend jobs in coalmining and car manufacturing. She does not need to make gestures on EVs to win comfortably, so we should take her statements as real policy intentions.”

A German familiar with the industry and Germany politics confirms to us this is an accurate take. James adds:

“Merkel’s German doctorate from Leipzig University (between an M.Sc. and a Ph.D) is in quantum chemistry. Like Thatcher she genuinely understands the science of climate change and air pollution. My hope and expectation is that she will use her renewed mandate to speed up the Energiewende again after the slowdown under SPD and industry pressure. She is still a skilled politician; German carmakers have moved a lot towards the EV transition in the last few years, and are far less likely to oppose a stronger EV policy.

However, another commenter (“Jake“) notes a more critical stance on Merkel, including the tack taken by her top political opponent. He highlights a translation from the German article linked above:

“At the end of last week Merkel’s challenger in the election campaign, SPD leader Martin Schulz, had presented a five-point plan and announced the introduction of a pan-European electric car quota in the event of an election victory. Merkel rejected such a quota, because other drive technologies would be disadvantaged. Schulz on Monday cast Merkel as being previously conceptlessness in the car crisis: ‘On the weekend she rejected a quota for electric cars, today she calls a diesel ban. Ms Merkel has no plans for the German automotive industry.’ With her statement, the Chancellor was unsettling the affected diesel drivers. They now needed the assurance that the state would help them limit the damage inflicted by irresponsible automanagers.”

This article has been updated after publishing to add and adjust context.

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I'm a tech geek passionately in search of actionable ways to reduce the negative impact my life has on the planet, save money and reduce stress. Live intentionally, make conscious decisions, love more, act responsibly, play. The more you know, the less you need. As an activist investor, Kyle owns long term holdings in Tesla, Lightning eMotors, Arcimoto, and SolarEdge.


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