What if Germany stopped making cars?
Dieselgate" emissions-cheating scandal of 2015, would take another hit. In a paper published last year, Rüdiger Bachmann of the University of Notre Dame and others calculated that because the company was found fiddling with emissions readings, sales of other German brands in America fell by 166,000 cars, costing them $7.7bn in forgone revenues, or nearly a quarter of their total in 2014. If Germany’s car industry were to evaporate, in other words, this would “leave a huge economic crater in the midst of Europe", says Mr Schroeder of WZB.
Germany’s politicians are, of course, desperate not to let that happen. After Dieselgate, their support for the sector is less wholehearted. But subsidies such as tax breaks for company cars, which make it worthwhile for employees to forgo a part of their salary in exchange for a high-end vehicle, are not going away.
More than two in three new cars in Germany are bought by companies; many end up being driven mostly on personal trips. In Lower Saxony the car industry may well be too big to let fail. Volkswagen operates factories in five places besides Wolfsburg.
Altogether, the firm employs about 130,000 people there. The state’s politicians need only look next-door at Thuringia to see what might happen if its economy floundered—which it inevitably would were Volkswagen to crumble. The far-right Alternative for Germany party now leads Thuringian polls with 34%.
Such considerations are drowning out voices pointing out that extending life support for carmakers could be counterproductive in the long term. Mr Bachmann thinks German politicians need to put a bit more faith in market forces to fill the economic space that might open up as German carmaking wanes. Germany’s oversized car
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