The German auto industry is readying proposals for a new scrapping program to counter a sales slump that risks choking off production restarts at factories across Europe’s biggest economy.

The state premiers of Lower Saxony, Bavaria and Baden-Wuerttemberg, home to Volkswagen, BMW and Daimler, are expected to consult this week on a joint strategy ahead of a meeting with federal government leaders scheduled for next week.

While Chancellor Angela Merkel’s government has fast-tracked more than 1 trillion euros ($1.1 trillion) in aid to help the German economy through the coronavirus crisis, calls to hand more taxpayer money to the automotive industry have stoked political controversy.

A key sticking point is how sizable the state aid should be, given that the car giants raked in billions of euros in profits last year. And while industry executives would like to see the stimulus apply to all new models, the government may limit aid to just the cleanest cars.

New incentives will not look like the scrapping program that boosted auto sales during the financial crisis, Economy Minister Peter Altmaier said Wednesday in Berlin. Instead, measures should be “ecologically sustainable” and help reduce carbon dioxide emissions, he said.

VW and Daimler on Wednesday urged the German government to help boost demand for cars as the coronavirus pandemic hammered first-quarter profits and forced both automakers to drop their outlooks for the year.

“We need a swift decision on buyer incentives,” VW’s Chief Financial Officer Frank Witter said, echoing Daimler CEO Ola Kellenius who also called for the swift introduction of broad measures to rekindle demand for cars.

“A simple incentive would be effective,” Kallenius said on a call to discuss Daimler’s earnings.

Any incentive should help cut carbon dioxide emissions by taking older cars off the road, VW’s Witter said, adding that the automaker’s new electric car,
Source…