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Saker: Will governments exert more power over carmakers?

Jim Saker

It is always interesting to analyse where the power lies in any situation. For a number of years I have been arguing that the motor industry is no longer in control of its own destiny.

The influence of Government has become increasingly powerful and appears to have been enhanced by the situation arising after COVID-19.

When you start to look at what the coronavirus has done to our industry, the impact has been enormous. For example, there was a loss in production of 2.6 million vehicles in Europe alone in March and April.

The University of Duisberg is predicting a loss of 100,000 jobs across the German brands globally and also a worldwide slump in demand of 15%. 

A number of car manufacturers have appealed for Government support and this call has been backed by some industry bodies. This appeal is justified and should get a positive reaction from any responsible government.

Perhaps the most outspoken politician on the subject has been President Macron who has pledged to inject ¤8 billion (£7.2bn) to fuel the French car industry. On the surface, this would seem laudable, but there was an interesting caveat to what he was saying that has not been picked up widely.

In his initial speech he talked about the financial stimulus, but stated that ‘no car model currently made in France should be manufactured abroad’. In subsequent interviews he spoke of ‘reshoring’ and the re-localisation of car manufacturing back to France.

This may not be that significant immediately, but, going forward, Macron is saying that, if the car manufacturers want support, they will be a need to look to manufacturing in France.

In addition, he says he wants France to become the leader in EV production in Europe and, again, support will only be given if the manufacturer strategy aligns with French environmental policy.

The challenge will come if other governments decide that the time has come to retrench their support for domestic manufacturing. If this is the case, then there is a shift in the power balance, the price of government support is a loss of power in deciding where you locate and also what your product line-up should look like.

This has been supported in a Financial Times editorial which encourages politicians to learn the lessons from the last bailout a decade ago and use their influence to change the industry.

The FT argument is that at the last bailout there was an opportunity to push the industry towards becoming environmentally-friendly and, by implication, the opportunity this time should not be missed.

Whether you agree or disagree with Macron’s approach, France appears to have a strategy for its car industry. Not sure about the UK.

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