Merkel wins fourth term but potential coalition could spell trouble for automotive industry

25 September 2017

Merkel wins fourth term but potential coalition could spell trouble for automotive industry

25 September 2017

German Chancellor Angela Merkel has won enough votes to stay in power for a fourth term, while her Christian Democratic Party (CDP) will need to secure a coalition if it is to govern the country effectively.

However, following a fall in votes for the Social Democratic Party (SDP), the party has decided it would rather go into Opposition than renew the coalition that has governed Germany for the last four years. This means Merkel will need to find new partners, with the Free Liberal Democrats (FDP) and Green Party looking like the most likely allies. However, the CDP will need to work with both of them in order to form a majority.

For the country’s beleaguered automotive industry, this could cause an issue. German carmakers have been fighting the war against diesel, with announcements of scrappage schemes from individual manufacturers and a recall of 5.3 million vehicles to alter their emissions profile through software, following a national forum on the fuel.

The FDP is a staunch supporter of the automotive industry, while the Greens back the banning of diesel engines from cities, with MunichStuttgart and Cologne all considering the option. With the Chancellor attempting to cut her ties from the industry during the election campaign, going as far as to criticise companies over the diesel situation, the Green party may use this stance to push through their policies in order to achieve a coalition which the CDP needs.

One campaign policy the Green Party went to the polls with was the banning of petrol and diesel only vehicles from sale by 2030, ten years before similar bans in the UK and France would come into force. This is a policy that has been rejected by the previous German government, union IG Metall and the VDA industry association, which has also asked for help with a shift to electric vehicles (EVs)

The Green Party took control of the state of Baden Wuerttemberg, where Daimler’s Mercedes and Volkswagen’s Porsche have factories. It is on the record as saying diesel must be retained as an interim technology before electric cars take over. 

During the election campaign Merkel had plenty of harsh words for the auto industry. 

‘Large sections of the auto industry have gambled away unbelievable amounts of trust. This is trust that only the auto industry can restore. And when I say ‘the industry’ that is the company leaders,’ Merkel said at the start of the campaign. She also said big bonuses for executives were unfair. 

The automotive industry was a hot topic during the election process, with ministers from the SDP claiming that diesel was not cleaner than petrol, while a number of politicians rounded on Chancellor Merkel for her close ties to the industry, including accusations that she knew about the Dieselgate scandal before it broke. Coalition talks are expected to take some time, but shares in the Germany automotive industry, having fallen with the news that the Greens could be partners, have now stabilised, suggesting the industry is in a period of waiting to see what form the new government takes.