190614 Angela Merkel
Angela Merkel wants to do her bit to help out Germany's beleaguered carmakers. Image Credit: AP

Frankfurt: German Chancellor Angela Merkel wants to help offset the higher costs of cleaner vehicles by putting a price on carbon-dioxide emissions, potentially offering a lift to Germany’s vital auto industry as it grapples with the high-risk transition away from the combustion engine.

Germany and its automakers are facing a “Herculean task,” Merkel said on Thursday at a ceremony opening the Frankfurt car show to the public. While short on specifics, the German leader backed efforts to encourage consumers to buy more environmentally friendly products such as battery-powered cars fuelled by renewable power.

“We want to direct the behaviour of people in a certain direction,” she said. “The pricing of CO2 is the right way to make clear that all innovations should follow the goal of emitting less CO2. If we do this in a long-term and accountable way, there will be the incentives to move innovation in the right direction.”

Volkswagen AG, Daimler AG and BMW AG are facing tough times. Pollution concerns — intensified by VW’s 2015 diesel-cheating scandal — have tarnished the industry’s image and triggered massive investment in electric vehicles. Those costs had already started squeezing earnings when almost a decade of uninterrupted industry growth led by China came to a halt.

The consequence is Germany’s car production slumping to the lowest level since at least 2010.

Reset targets

Merkel had to surrender her goal to have 1 million electric cars on German roads by 2020. Sales of hybrid and electric cars in the country last year totalled a mere 55,000 vehicles, or 1.6 per cent of the market. In addition to boosting efficient technologies, the country needed to accelerate the roll-out of charging stations to ease consumer concerns, she said.

“If one believes that climate protection is a task for mankind, and I believe it is, then we must pay this price because otherwise we will have to pay a totally different price,” Merkel said.