Herbert Diess: ‘If we don’t face a second lockdown or further economic slump, I would argue that there’s no need for another purchasing incentive’
Herbert Diess: ‘If we don’t face a second lockdown or further economic slump, I would argue that there’s no need for another purchasing incentive’ © Sean Gallup/Getty

Volkswagen chief executive Herbert Diess has abandoned attempts to secure more stimulus for the auto industry after the world’s largest carmaker enjoyed a stronger-than-expected recovery in sales across western Europe and China.

“If we don’t face a second lockdown or further economic slump, I would argue that there’s no need for another purchasing incentive,” Mr Diess, who lobbied loudly for subsidies in Germany at the start of the pandemic, told the Financial Times.

Although the EU car market has contracted by almost 30 per cent so far this year, VW’s sales in western Europe climbed more than 10 per cent in September, during which it delivered more than 300,000 vehicles in the region. VW’s sales in China, its largest market, were up almost 1 per cent in September from the same month last year.

At its delayed annual general meeting at the end of September, VW forecast that the upswing in orders would help it post a profit in 2020. The company is due to announce its full quarterly results on Thursday.

“There were a lot of incentives out there for electric cars and plug-in hybrids in Germany and all over Europe, and it worked,” Mr Diess conceded of the stimulus governments introduced early in the pandemic.

The verdict from Mr Diess came after Ola Kallenius, the chief executive of rival Daimler, also dismissed the need for further stimulus even as much of Europe grapples with a new rise in coronavirus cases.

Daimler’s net profits increased almost 20 per cent in the third quarter of the year, to almost €2.2bn, as Mercedes-Benz sales in China grew more than 23 per cent in the period — a development Mr Kallenius described as “almost too good to be true”.

Germany’s once-powerful auto lobby was pushing for comprehensive stimulus for the industry as recently as June, asking Berlin to repeat a €5bn scheme rolled out in the aftermath of the 2008 financial crisis, which provided an incentive for the purchase of new vehicles and helped the sector reach record sales levels.

Mr Diess was heavily criticised for appearing on German national television in April, calling for an “urgent stimulus package” in the EU’s largest car market that would subsidise purchases of combustion engine vehicles, even as VW enrolled tens of thousands of workers in state-sponsored furlough schemes.

“It wasn’t very skilful of him,” said a person familiar with the thinking of one of VW’s key investors, as politicians poured scorn on the Wolfsburg-based group’s decision to go cap-in-hand to Berlin while planning to pay more than €2bn in dividends.

Monika Schnitzer, an economic adviser to the German government, argued at the time that the country’s carmakers were “in good shape” despite coronavirus-induced shutdowns, and warned that reviving the economy via a single industry was a “dangerous situation”.

Ultimately, the German government opted to only increase subsidies for the purchases of new electric vehicles, and a reduction in Mehrwertsteuer, or VAT.

But Mr Diess defended his original decision to call for the stimulus. “In light of the sudden standstill of the economy in the spring, I was pushing for car buying incentives because such a big part of the German economy depends on the car sector,” he said.

“The argument was that if you want to stimulate the German economy quickly, the auto sector provides the best lever because Germany is so much into automotive production, development and retail,” he added.

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