_ Yuri Kofner, economist, MIWI Institute. Munich, 01 March 2023.
The automotive combustion engine industry is of immense importance for Germany as an innovative industrial location. At least 620,000 direct and indirect jobs and still 3.1 percent of Germany’s gross value added depend directly on combustion engine technology.
CSU party for combustion engine phase-out, FDP party makes fake resistance
But in the latest of many hammer blows to Germany’s prosperity and industrial prowess, the February 2023 European Parliament, with votes from the SPD and Greens, as well as the EPP and Renew Europe groups, has decided to set fleet limits for new cars and vans to zero from 2035, effectively banning the sale of internal combustion engine cars in the EU.
Although Bavaria’s prime minister Dr. Markus Söder and his CSU party are now supposedly opposing the combustion engine ban due to the election campaign in Bavaria, it was they who had called for it for years – in 2008, 2010 and 2020.
It remains to be seen whether the ban will include internal combustion engines that run on biofuels or synthetic fuels. The corresponding test request submitted by the FDP is contractually non-binding and can be ignored by the Commission at any time.
Green two-class society
In addition, the ban includes the so-called “Ferrari exemption,” which allows luxury automakers to continue selling “internal combustion” vehicles if they produce fewer than 10,000 cars per year. This is another step in the green transformation toward a two-class society in which only the elite will be able to afford formerly universally available goods and services: Meat, flying, home ownership, and now the internal combustion car. And even now, e-cars are much more expensive to run than internal combustion engine cars.
Unfortunately, the current anti-technology ideology of all the system parties on state, federal and EU level leads to a deindustrialization and emigration of the German combustion engine industry.
For example, BMW has relocated its Munich internal combustion engine production to Austria and the U.K. And Audi declared that it will cease production of ICE vehicles in Ingolstadt by 2033, but will continue its production in China.
The ifo Institute estimates that the switch to e-mobility in the German automotive industry will result in a net loss of more than 170,000 employees (direct and indirect) by 2025 and 215,000 by 2030. According to the BMWi, the phase-out of internal combustion engine technology will cost a net 300,000 jobs nationwide by 2040 and 55,000 jobs in the Bavarian automotive sector alone by 2025, according to the ifo Institute. The BMWi has also said that the German automotive industry will lose more than 170,000 jobs by 2025.
The market doesn’t want any more combustion engines? Wrong!
The German phase-out of internal combustion engine technology is not market-driven, but state-imposed. In particular, it is only a fantasy of Western governments, with Berlin at the green helm, of course. This was also confirmed to me in personal conversations with BMW and MAN employees.
Because, on the contrary, nations like China are actively using industrial policy instruments to replace Germany as the leading manufacturer of internal combustion engines. To this end, for example, China recently halved its vehicle taxes on internal combustion cars from 10 to 5 percent and increased research grants for them. And while German patents on internal combustion engines declined by 13 percent between 2019 and 2020, they increased by 10 percent in Korea.
A recent comprehensive study by Greenpeace (!) predicts that the number of passenger cars with internal combustion engines sold worldwide will increase by about tenfold to nearly 700 million units between 2022 and 2035.
Climate protection goes differently
Even if one is of the opinion that mankind must reduce its CO2 emissions, then a ban on internal combustion vehicles would be the most “planned-economy” and inefficient of all ways to approach it.
This is because unilaterally reducing the demand for fossil fuels in Germany, Europe or even the entire West, will, ceteris paribus, lower their price on the world market and thus increase their consumption by non-participating economies, as well as the associated global CO2 emissions. This is the so-called “Green Paradox” of economist and former president of the ifo Institute Dr. Hans-Werner Sinn.
Many studies also show that e-cars emit more CO2 throughout their life cycle than internal combustion cars.
Running combustion cars on e-fuels
Moreover, if one wanted to, one could run the internal combustion engine on synthetic fuels. Unlike e-batteries or hydrogen drives, this new sector would not cost value added and jobs, but create new ones. A recent study by the Cologne Institute for Economic Research (IW) showed that by 2050, an expansion to combustion engines with e-fuel propulsion could generate nearly 400,000 new jobs and annual sales of 30 billion euros in the German mechanical and plant engineering sector alone.[17
Majority and rights for combustion engine industry
According to a recent Civey survey, the majority of Germans (69 percent) oppose the EU ban on the internal combustion engine.
It is therefore to be welcomed that Italy’s new right-wing government has announced that it will oppose the EU’s decision to ban internal combustion engines. “The ban on gasoline, diesel and gas cars in Europe from 2035 is a mistake, a gift to China that will bring the closure of factories in Italy and Europe,” said Matteo Salvini, Deputy Prime Minister of Italy right. The ban is a mistake.
The German government must finally recognize the internal combustion engine industry as an essential part of the German economy and therefore support a mobility mix of fossil, synthetic, electric, bio and hydrogen drives that is open to the market and technology.
The German government must work to maintain and expand Germany’s position as a leading research and production location for the automotive internal combustion engine industry.
To this end, the following measures, among others, could be taken:
At EU level:
- Cancellation of the planned tightening of the CO₂ fleet target for newly registered passenger cars (colloquially known as the “combustion engine phase-out”).
- Preventing the planned extension of the EU ETS to road transport.
- The CO2 emissions of cars and trucks are to be measured exclusively according to the entire life cycle (“well-to-wheel” principle).
- Preventing the tightening of the planned Euro 7 emissions standard.
At the federal level:
- Abolishing the CO2 duty on gasoline, diesel and natural gas.
- Preventing the possible introduction of a speed limit on German highways.
- Abolition of the so-called “environmental bonus”.
- Reduction of the electricity tax to the EU minimum.
Developing and implementing a comprehensive national strategy for maintaining and expanding Germany as a leading research and production location for the automotive internal combustion engine industry. Including:
- Financial, tax and regulatory incentives for the relocation of internal combustion engine production back to Germany.
- State financial support for technology-open research and development of efficient and clean internal combustion engine technologies using fossil, biogenic and synthetic fuels.
- Introduction of a comprehensive training offensive to meet the skilled labor needs of the German automotive internal combustion engine industry.
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