Merkel Says Car Industry Can Be Part Of Climate 'Solution'

Outgoing Chancellor Angela Merkel on Tuesday said Germany's car industry could be "part of the solution" to the climate emergency, as she opened a major motor show for the last time.

Germany's leader of the last 16 years said she was convinced the transition to a climate-neutral economy by 2045 would be "a success" and touted her government's steps to support it by subsidising electric vehicles and the development of charging infrastructure.

The German car industry was previously seen as "reluctant" to embrace the switch to environmentally-friendly electric cars, Merkel said at the IAA motor show, before praising the progress that has been made.

The move to electric was accelerated by the "dieselgate" scandal in 2015, when German car giant Volkswagen admitted to fitting millions of vehicles with emissions-cheating devices.

Merkel, who has been a regular at the IAA over the years, earned the sobriquet the "car chancellor" for her efforts in the past to shield German carmakers from tougher EU pollution rules.

"The auto industry is not just part of the climate problem, but above everything else a central part of the solution," she told the conference hall in Munich.

Merkel cautioned, however, that European coordination would be needed in future to ensure "security for jobs" in the face of competition from countries where climate rules are less stringent.

Her opening speech at the IAA was her last as chancellor, before she steps down after the German elections on September 26.

The biennial IAA is mired in controversy this year as Germany struggles to adapt its flagship industry to the electric and digital revolution.

Environmental activists blocked motorways around Munich on Tuesday, while others brandished slogans like "Stop driving climate change".

Merkel was among those to express their anger when the "dieselgate" scandal broke.

But in Brussels, her government had sought to slow the shift to e-mobility by watering down toughened emissions regulations that German carmakers would struggle to comply with, the Sueddeutsche newspaper said.

On the eve of Merkel's visit, the boss of Volkswagen even blamed her government for slowing down the electric revolution by incentivising diesel fuel for years.

"A car company cannot do this transition (alone) because you need the right environment," Volkswagen CEO Herbert Diess told AFP. "If you keep diesel cheap... nobody will buy an electric car, it's impossible."

Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen, called the government's diesel strategy "depressing and incomprehensible".

"The state fuelled a diesel boom through tax breaks, and now diesel passenger cars are practically unsellable," he told AFP.

Merkel's government has always treaded gingerly because of the 800,000 jobs at stake in the industry.

But the Sueddeutsche daily lamented in August that "with her overly generous attitude towards the car industry, the chancellor has helped neither the companies nor the country in the medium term".

Dudenhoeffer agreed. "Scrappage schemes, incentives to buy electric cars, subsidies for battery production, aid for recycling, short-time working allowances -- this has been the strategy for 16 years. This alleviates short-term economic problems, but does not build a new structure," he said.

With the momentum for greener mobility growing, and tougher anti-pollution guidelines now in place, Germany's carmakers are no longer able to put off the inevitable and this week's IAA will see a slew of new electric models being unveiled.

The decline of the combustion engine is proving to be an existential crisis for the auto industry, which accounts for more than 12 percent of jobs in the industrial sector in Germany.

In late 2019, Audi said it was planning to slash 9,500 jobs in Germany by 2025, while Daimler announced it would cut 10,000.

The threat of legal action against carmakers also hangs over the fair, after Greenpeace and Germany's DUH environmental group threatened last week to file lawsuits against Volkswagen, BMW and Daimler if they do not speed up efforts to reduce carbon emissions.

The campaigners want the auto companies to stop producing diesel or petrol cars by 2030, arguing that their current pledges for electrification are vague and non-binding.