According to Chancellor Angela Merkel’s Christian Democratic Union party, the German government will double the current subsidies up to € 6,000 ($ 6,720) to electric vehicles that cost € 40,000 ($ 44,800). When the current contribution of the producers is included, the total incentive goes up to € 9,000 ($ 10.080).
Potential car buyers will also benefit from a temporary drop in the country’s sales tax from 19% to 16%.
Incentives are part of a comprehensive € 130 billion ($ 145 billion) package approved by the German government late Wednesday.
Regarding incentives Thursday, German finance minister Olaf Scholz said they are part of a wider effort to help the climate. “It is about renewable energies. This is about all the climate activities needed to reach a renewable energy. [carbon] We have to start now, “said CNN.
The total incentive package corresponds to 4% of the country’s annual economic production. Combined with the previously announced expenditures and tax cuts, the total amount of the emergency alert in Germany has now reached 14% of GDP.
Incentives can accelerate the efforts of German automakers, including Volkswagen, to produce and sell more electric cars. Volkswagen, which also owns Audi, Porsche, SEAT and Skoda, plans to spend € 33 billion ($ 37 billion) for electricity development by 2024 and is expanding into new business areas, including charging infrastructure and battery production.
The global car industry has forced sales to decrease and factories and dealers around the world to close for two years before the coronavirus pandemic is hit. Sales fell off a cliff this year and there is little sign of a recovery.
“The industry is standing in a dark cellar and still manages to step back, although there is still no light trail,” said Klaus Wohlrabe, head of survey at Ifo.
Still, electric cars can power backfire. According to research company Canalys, the European electric vehicles and plug-in hybrid market grew 72% in the first quarter of 2020. The two vehicle categories now account for over 7% of all new vehicles delivered on the continent.
Canalys automotive industry chief analyst Chris Jones said that “impressive” results for electric vehicles could be better even if there are no pandemic disruptions. According to Canalys, the introduction of Germany’s new subsidies and the electric versions of already popular models should help keep the trend going.
Germany’s new stimulus package was larger than analysts had expected. In addition to electric car incentives, it includes money for green investments, tax breaks and relief for families with children.
“After five years of financial surplus and a drop in the German public debt ratio … the package shows that once again Germany is ready to spend and can spend,” said Berger Schmieding of Berenberg Bank. Said.
– Nadine Schmidt, Fred Pleitgen and Mark Thompson contributed to reporting.