Germany plans $1.4 billion in incentives for electric cars

Bloomberg

German Chancellor Angela Merkel’s government reached a deal with automakers to jointly spend 1.2 billion euros ($1.4 billion) on incentives to boost sluggish electric-car sales.
Buyers will be able to receive as much as €4,000 in rebates to help offset the higher price of an electric vehicle, Finance Minister Wolfgang Schaeuble said at a press conference in Berlin. Purchasers of hybrid cars will get as much as €3,000 off the price. The industry will shoulder 50 percent of the cost.
“The goal is to move forward as quickly as possible on electric vehicles,” Schaeuble told reporters, adding that the aim is to begin offering the incentives next month. “With this, we are giving an impetus.”
The car industry, the country’s biggest manufacturing sector based on revenue, sees incentives as a potential game changer due to the size of the German market, which accounts for nearly a quarter of all auto sales across Europe. Merkel, who hinted in February that she was ready to back subsidies to reach her goal of 1 million electric cars on German streets by 2020, sealed the agreement with automotive CEOs late Tuesday after weeks of discussions over how to divide the funding. The industry originally offered to pay 25 percent of the total.

Biggest Industry
Just over 30,000 electric vehicles, which are more expensive than conventional models, have been sold in Germany. That’s a tiny fraction of the more than 3 million cars bought each year in a country which has historically leaned on diesel technology to reduce emissions.
Volkswagen AG, Daimler AG and BMW AG, along with their suppliers such as Continental AG, directly employed 790,000 people last year, with industry sales totaling 404 billion euros in 2015, according to the VDA German automakers’ association.
Production in Germany totaled 5.7 million cars last year, up 1.9 percent, for models such as the Mercedes-Benz S-Class sedan made near Stuttgart and the Audi A3 sedan built in Ingolstadt.
Automakers are “one of the key lead industries and it doesn’t help if we leave it completely on its own” in global competition, Vice Chancellor Sigmar Gabriel said at the Berlin event, comparing the electric-car incentives to the subsidies European governments gave years ago to help build up Airbus Group SE. Car executives point to France, where the government last year started offering a €10,000 rebate to drivers trading in diesel-powered cars older than 14 years, and Norway as examples of how governments can aid in the development of the market for the green technology.
In Norway, electric cars enjoy a plethora of perks. There’s no value-added tax on purchases nor a one-time fee imposed on regular cars. There is also free battery charging, free parking and an exemption from congestion charges. On top of that, electric-car owners are allowed to drive in bus lanes to avoid traffic.
In throwing her support behind the program, the chancellor is walking a tightrope within her governing bloc. While some — such as the head of the Bavarian sister party to her Christian Democratic Union, Horst Seehofer — favor incentives to spur sales and create jobs, many others have expressed their opposition to such measures.