Jump Start Government to Offer Electric Car Subsidies

Chancellor Angela Merkel has backed a plan to subsidize the sale of electric cars, Handelsblatt has learned. But she will have to overcome stiff opposition within her own party, the Christian Democrats.
Subsidies for electric cars and charging stations are on the way.

Chancellor Angela Merkel has backed a plan to jump start demand for electric cars by offering €1 billion ($1.12 billion) in government subsidies, Handelsblatt has learned.

Ms. Merkel will discuss the plan with the heads of BMW, Daimler and Volkswagen during a meeting at the chancellery Tuesday evening, according to Handelsblatt's sources.

Under the plan, the federal government would provide €100 million in tax benefits and invest €300 million to construct a network of more than charging stations along the autobahn.

But the plan's centerpiece is €600 million in government subsidies for car buyers, with the automakers to match that amount. So far, they've been willing to pony up €200 to €250 million.

If electric automobiles are hard to sell, then the industry will have to offer them for a cheaper price. I am strictly against these subsidies. Michael Fuchs, CDU Deputy Parliamentary Chief

Automakers such as BMW have invested billions in developing electric cars as the European Union strengthens its emissions standards. Diesel vehicles, however, still account for 80 percent of sales in the economic bloc.

Consumers would receive €4,000 toward the purchase of pure electric cars and €3,000 for plug-in hybrids. Subsidies would be available for cars with a list price of up to €60,000 and no special features.

There's also talk of offering larger subsidies as a proportion of the list price for smaller vehicles. The goal is to change traffic patterns in Germany's crowded city centers.

The government still has a long way to go to achieve its goal of putting 1 million electric cars on the road by 2020. Only around 25,000 were registered at the end of last year, in addition to 130,000 hybrids - out of a total 45 million cars.

The money for the plan would come from Germany's energy and climate fund, which is financed with proceeds from the country's emissions-trading regime. Since there's not enough money in the fund, a supplementary budget would be needed, according to Handelsblatt's sources.

Ms. Merkel's center-right Christian Democrats, however, oppose subsidizing the sale of electric cars, and the governing parties have rejected such subsidies in their coalition agreement.

"If electric automobiles are hard to sell, then the industry will have to offer them for a cheaper price," Michael Fuchs, the deputy head of the Christian Democratic parliamentary group, told Handelsblatt when the subject was discussed earlier this week.  He added that he was "strictly against these subsidies."

 

Government Subsidies for Electric Cars e-cars hybrid-01

 

Ms. Merkel and her allies, however, have apparently argued that the Volkswagen diesel emissions-rigging scandal,  known as Dieselgate, which has engulfed the country's auto industry, makes the transition to electric cars all the more urgent.

Last week, Transportation Minister Alexander Dobrindt announced that Audi, Porsche, Mercedes, Volkswagen and GM's Opel had agreed to a voluntary recall of 630,000 diesel vehicles.

An investigation by Germany’s car agency, KBA, found emissions irregularities stemming from a legally permissible device called a “thermofenster,” or thermal window, which allows increased emissions at certain temperatures to protect a vehicle’s engine. The automakers, however, allegedly used the device excessively, emitting an unnecessarily high amount of nitrogen oxide, a toxic gas that contributes to smog.

The U.S. Justice Department has called on Daimler to investigate its emissions certification process. In February, a class-action lawsuit filed in New Jersey alleged the world’s second largest luxury carmaker had installed software in its BlueTECH engines to cheat emissions tests.

These scandals have strained the German government's otherwise cozy ties with the country's automobile industry. The state of Lower Saxony, for example, owns a 20 percent stake in Volkswagen, Germany's largest employer.

"The shadier their dealings, the less political willingness there is to help the automobile industry," Mr. Fuchs said.

Carmaking is Germany's biggest industry, accounting for more than 800,000 jobs and annual revenue of around €350 billion.

During their tour of the Hanover Trade Fair on Monday, Ms. Merkel and U.S. President Barack Obama didn't visit the stand set up by Volkswagen.

There was no official statement as to why.

 

Daniel Delhaes covers the transportation sector for Handelsblatt in Berlin. Simon Book is a member of Handelsblatt's investigative reporting team. To contact the authors: [email protected] and [email protected]