Following the French government’s announcement of an auto industry bailout that included some pro-EV measures, the German government has unveiled a stimulus package that advances vehicle electrification.
Chancellor Angela Merkel’s Christian Democratic Union, along with its two governing partner parties, hashed out the agreement in a marathon 21-hour negotiating session. The package, which is expected to cost €130 billion over the next two years, includes a cut in the country’s VAT tax, as well as financial help for municipalities and for families with children.
The legislation establishes a €50-billion fund for “addressing climate change, innovation and digitization.”
The current EV incentive of €3,000 will be doubled to €6,000 for new cars costing less than €40,000. The price limit to receive adjusted tax benefits for EVs will be raised from €40,000 to €60,000, and an existing EV tax exemption will be extended from 2025 to 2030.
Germany’s automakers were hoping for measures that would incentivize the sale of fossil-fuel vehicles. German state governments with major auto industry presence proposed incentives of €3,000 for legacy vehicle purchases, along with a scrappage scheme that would award an additional €1,000 for taking an older vehicle out of service. Lawmakers said “Nein, danke” to this proposal.
The temporary reduction of the country’s Value Added Tax (VAT) from 19% to 16% will benefit buyers of all vehicles. The auto industry, including suppliers, will receive €2 billion worth of support for R&D over the next two years. Other than that, the automobile-related incentives contained in the package are aimed squarely at electrification and emissions reduction. Chancellor Merkel said the “toughest crisis” in Germany’s modern history would be used as an opportunity to reconfigure the country for the 21st century.
“This is about renewable energies. This is about all the climate activities which are necessary to get to a [carbon] neutral economy in 2050,” Finance Minister Olaf Scholz told CNN. “We have to start now.”
Other transport-related measures include: an increase in the vehicle tax for high-emission vehicles; €200 million worth of support for fleet electrification for social NGOs; €1.2 billion in support for electrifying bus and truck fleets; €7 billion of investment in hydrogen technology; and €2.5 billion euros in support for EV R&D, charging infrastructure and battery manufacturing.
The infrastructure investment plan includes support for installing EVSE at gas stations. Some media outlets reported that the package will “require every gas station to have charging stations,” but details of the measure have not yet been revealed. As several EV industry observers noted, gas stations are generally not considered optimal locations for charging stations, except for DC fast charging at locations near highways. Electrek’s Bradley Berman stated the case well, writing that Level 2 charging is “definitely not the right choice for a gas station,” and suggesting that German policymakers were “applying an outdated combustion-oriented frame of mind to new technology.”