EU automakers call for Covid-19 bailouts, governments respond

27 May 2020

The European Automobile Manufacturers’ Association (ACEA) and a number of other groups linked to the European automotive industry have called for an “ambitious recovery plan” for the automotive sector.

Car production and distribution in Europe came to an effective standstill as a result of the Covid-19 lockdowns and restrictions. In April 2020, registrations of new passenger cars in the EU 27 posted a year-on-year decline of 76.3%—the number of new cars sold fell from 1,143,046 units in April 2019 to 270,682 units last month. From January to April 2020, EU demand for new passenger cars contracted by 38.5%.

Commercial vehicle registrations in the EU 27 declined by 67.0% in April. Four months into the year, EU demand for new commercial vehicles contracted by 34.5%, largely due to the impact of the Coronavirus on March and April results.

Covid-19 provoked an unprecedented crisis in the sector, said ACEA.

The economic and social impact of the COVID-19 crisis on the automotive sector is particularly severe. Workers, although supported by short-time work arrangements, have seen their incomes reduced, and companies are facing cash drains as their revenues have disappeared. Currently, there is little visibility on what the future holds. If this situation persists, the sector risks a meltdown with large-scale bankruptcies and restructuring.

During the financial crisis (2008-13), the automotive sector lost 440,000 jobs (in car production and the aftermarket). If no measures are taken, this number risks being dwarfed by the current recession which may be much deeper.

ACEA has called on the European Commission for a “bold industrial recovery plan” that would bring the industry “back on track by stimulating sales and reviving production”. This recovery plan should include the relaunch of the industry with harmonized guidance on preventive health and safety measures for the workplace; support for viable companies through state aid, investment guarantees, tax breaks, and soft loans; and vehicle renewal schemes financially supported by the Commission.

In a hope to tap into the Green Deal funding, the autoindustry has called on the Commissions to “support the sector in delivering on the digital and low-carbon transitions”. Electric vehicles, ordinarily a risky business proposition, can became increasingly viable with increased levels of government grants, loans and other forms of subsidy. Automakers also renewed their calls on the Commission to accelerate the roll-out of charging infrastructure for cars, vans and commercial vehicles and deliver at least 2 million charging points and refueling stations across the EU for all types of “sustainable” vehicles.

European governments are beginning to respond with bailout money and other measures such as loan programs, deferrals of tax payment, and furlough schemes.

• French president Emmanuel Macron announced an €8 billion support plan, under which the state bonus for consumers buying electric cars would increase to €7,000 from €6,000, while customers buying a conventional car would receive a €3,000 bonus under a scheme that would apply to three-quarters of households. The plan also encourages manufacturers to relocate their factories back to France, although it is unclear if it includes any specific conditions in this respect.
• The UK government launched Project Birch that will allow the UK treasury to offer “last resort” support to select firms in order to avoid bankruptcy restructurings, which could have severe repercussions for bond- and stock-holders. Those firms could include Tata-owned Jaguar Land Rover, which has been in talks with the government to secure a loan of more than £1 billion.
• Fiat Chrysler nears €6.3 billion loan from Intesa Sanpaolo SpA, which would be backed by the Italian government.
• Renault is “fighting for its survival” and had applied for a state-guaranteed loan of 5 billion euros.

Source: ACEA