Post-COVID Recovery in the Transportation Sector: Is the Grass Greener on the Other Side of the Rhine?

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As we noted in a recent article, the The transportation sector is one of the sectors hardest hit by the COVID crisis everywhere, both due to the lockdown and the terms of the reopening [1]. It therefore makes sense that it would be among the first sectors targeted by post-COVID recovery plans. On both sides of the Rhine, announcements on this topic have come one after another. On the French side: support for Air France [2], support for Renault [3], an automotive recovery plan [4], and, most recently, support for the aerospace industry [5]. On the German side, numerous measures are included in the plan published by the grand coalition [6], while the federal government has also come to the rescue of the national airline Lufthansa [7]. The two countries face relatively similar situations in terms of transportation: globally competitive automotive industries, extensive rail networks, and world-class national airlines. To what extent are the strategies adopted similar?

More simply put, Which of the two countries has the highest level of ambition?On Aviation, Minister Peter Altmaier’s speech makes it clear where the federal government’s priorities lie: “ We have chosen not to impose any restrictions other than general environmental ones, as our goal is not to have the government interfere in the company's strategy " [8]. Conversely, the French government has imposed several conditions on its support for Air France, including the closure of domestic routes where a train journey takes less than 2 hours and 30 minutes, even though the actual impact of this measure remains debatable, particularly since other airlines operating in France are not affected [9]. Regarding the upstream sector—that is, aircraft manufacturing itself—the Franco-German partnership is central to the operations of Airbus for well-known historical reasons: it would be incomprehensible for there to be any inconsistency between the support provided by the two countries. France and Germany are thus both banking on hydrogen to decarbonize aviation in the long term, In addition, Germany is taking a more pragmatic stance in the short term: 1 billion euros to convert the current fleets to the latest, more fuel-efficient models.

With regard to the automotive industry, The surprise comes from the executive branch German who was able to resist pressure from industry leaders (who are, after all, very powerful in Germany) and aexcluded internal-combustion vehicles from the economic recovery plan. Thus, the announced incentive applies exclusively to electric vehicles (up to 6,000€) and plug-in hybrids (up to 4,500€) [10]. In France, electric vehicles are of course favored, with up to 14,000€ in subsidies when combining the various incentives [11], but internal-combustion vehicles are also eligible for a 3,000€ trade-in incentive. Finally, in both Germany and France, the issue ofcharging infrastructure is being taken very seriously, with a target of 100,000 charging stations in France by the end of 2021 and 2.5 billion euros allocated in Germany to infrastructure and the development of electric mobility. The differences are probably most pronounced in the rail sector. While on the German side, 5 billion euros in support for Deutsche Bahn has already been announced in addition to the 10 billion previously planned for 2020–2030, on the French side, nothing specific has yet been announced for the SNCF. This is despite the appeal made by its president, Jean-Pierre Farandou, which he reiterated on May 20 before members of parliament [12].

In the maritime sector Finally, Germany has announced 1 billion euros to facilitate the transition to cleaner transportation, while France has not yet made any announcement (though one is expected). This comparison between France and Germany sheds light on the unique nature of each country’s strategy. Above all, it helps identify which strategy appears to be the most ambitious (Germany’s for cars, trains, and maritime transport; France’s for air travel). However, such an approach should not obscure the fact that, while they are competitors, France and Germany are also partners on these topics. In this regard, the “Airbus of Batteries” project—whose ownership remains entirely French for the time being—is an opportunity to bolster the still-fledgling momentum of European-made battery-powered electric vehicles.

Article written by Clément Mallet (Senior Consultant) clement.mallet@carbone4.com

Sources: [1] See the May 19, 2020, Mobility Analysis [2] BFMTV [3] Ibid. [4] Economie.gouv [5] Liberation [6] CDU [7] Financial Times[8] “We have deliberately refrained from imposing conditions beyond the broader sustainability requirement, because our aim is not to have the state determine the company’s day-to-day business strategy” "Ibid. [9] The Climate Action Network, also notes that these routes account for only 0.5% of emissions from flights departing from France [10] DW [11] Total of the various incentives: €7,000 eco-bonus, €5,000 conversion bonus, and $2,000 Low-Emission Zone bonus [12] National Assembly