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Auto Industry

Berlin may offer tax breaks for electric cars after all

To subsidize or not to subsidize: The German government has been torn over using taxpayer money to kick-start the market for electric autos. But its resistance now appears to be waning.

electric car

Germany wants a million e-cars on the road by 2020

Just days after German Economics Minister Rainer Brüderle spoke out against electric car subsidies, rumors are afloat that the government does indeed plan to commit billions of euros to put a million e-cars on the road by 2020.

Without naming sources, the Bild daily newspaper reported that Chancellor Angela Merkel's Cabinet plans to eliminate the motor vehicle tax on electric cars for their first 10 years of registration.

The scheme would put drivers opting for the more expensive electric technology on a similar financial footing as those of traditional fuel-combustion vehicles.

Wide-scale introduction

The ministry press office was not available for comment.

The rumors come ahead of a meeting next week at which the National Platform for Electric Mobility, consisting of government officials and industry representatives, will make recommendations about measures to support the wide-scale introduction of electric cars.

Merkel's Cabinet aims to follow up the experts' report with a program that, according to Bild, will include financial incentives.

loading station

Some experts say infrastructure must be improved to kick-start demand

The newspaper reports that subsidies could be worth as much as 3.8 billion euros over a period between 2012 and 2014 – a scale industrial analysts expect would create 30,000 new jobs.

Earlier this week, Minister Brüderle said that government-funded premiums for buying electric cars would do e-mobility a "disservice," arguing that such incentives would only "distort competition."

German carmakers have been lobbying intensively for subsidies, incentives and other forms of support to develop a mass market for electric cars. They point to countries such as France, Japan and the United States, which have helped their domestic manufacturers develop markets for these new vehicles. The French government, for instance, has decided to add large numbers of electric cars to government fleets to create demand.

The German Electrical and Electronic Manufacturer's Association (ZVEI) recommends temporarily lifting Germany's 40 percent tax on electricity for drivers of electric cars.

Some experts agree that government help is necessary if Germany wants to establish a globally competitive electric car industry.

Japan leading the pack

"If you set a goal to put a million electric cars on the road by 2020 as the German government has done, then you need to do something to achieve that goal," Stefan Bratzel, a German automobile expert and professor at the University of Applied Sciences in Berglish-Gladbach, told Deutsche Welle.

"Given the significant cost difference between electric and traditional cars, there is no way to achieve this goal without subsidies."

An electric car motor

Electric cars are still too expensive for many consumers

Bratzel admits, however, that some groups within the German government are weary of electric car subsidies for various reasons. Among them: foreign car makers, particularly Japanese manufactures that currently lead the pack, could emerge as the major beneficiaries of such aid; and critics of programs that drive sales through consumer incentives like the "cash-for-clunker" scheme launched a couple of years ago would be upset to see yet another.

German auto expert Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen, believes the government should not support car purchases but rather provide money for research and development and establish the infrastructure required to charge and maintain new electric vehicles.

"It's too easy to say we need to give consumers money to buy cars," Dudenhöffer told Deutsche Welle. "What we really need to do is build products that are competitive." And that, he believes, is an area where the government can help by providing additional funds for R&D.

Dudenhöffer criticized the government's current funding program for being too small and too dispersed.

Author: John Blau
Editor: Sam Edmonds

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