The German government wants to see one million electric cars on the nation's streets by 2020 and is doubling its investment in research and development. But some wonder if government intervention is the right strategy.
Berlin wants to see one million electric automobiles rolling quietly down German roads by 2020 and is revving up research and development to achieve that goal, even though some experts warn subsidies can lead to market distortion.
The federal government plans to double its electric vehicle research and development aid, pouring an additional 1 billion euros ($1.4 billion) into the R&D budget by 2013 in a bid to make Germany a leader in the sector.
Right now, only about 2,300 of the 42 million cars registered in Germany run on electricity. According to a report released on Monday by the National Electric Mobility Platform - a government-sponsored council made up of auto industry representatives, transportation associations and unions - even the most optimistic projections predict that only 450,000 electric cars would be put on German roads by 2020 without a government program to promote them.
Strategies to achieve the one-million goal include tax rebates, dedicated parking lots, special traffic lanes for e-cars, and increased government use of emission-free vehicles.
No direct rebates
But Chancellor Angela Merkel has rejected direct subsidies to consumers to promote all-electrics, which are more expensive than traditional automobiles. Mitsubishi's i-MiEV, one of the first electric cars to be mass-produced, costs more than 30,000 euros - much more than similar, gasoline-powered vehicle.
France's Bonus-Malus program offers a 5,000 euro incentive to consumers who buy a vehicle with CO2 emissions of 60 gr/km or less, which includes all-electric cars and many plug-in hybrids.
But a program similar to Germany's "cash for clunkers" program, which gave rebates to people who traded in ageing vehicles for more fuel-efficient models, is not in the works, Merkel and other high-ranking officials, such as Transport Minister Peter Ramsauer, have said.
Germany prefers another route: doubling its investment in basic research and development to more than 2 billion euros ($2.8 billion) and focusing on key areas like battery technology. The automobile industry has also pledged 17 billion euros in investments over the next few years.
Tax incentives are also under discussion. Owners of electric vehicles could be exempt from road taxes for 10 years.
Along with new rules that could see electric cars using bus lanes and zipping past regular cars stuck in traffic jams, the government is also considering creating parking zones where battery charging would be free.
"We're going to see these vehicles come in very quickly," Merkel said. "I'm certain that German producers will be in the fray at the right time."
At the forefront
Germany hopes the electric car push will help keep its all-important automobile sector in at the forefront of global competition. While companies such as BMW and Daimler, the maker of Mercedes-Benz cars, have enjoyed great success in the luxury segment, they have been slower to hit the gas pedal when it comes to electrics.
BMW, however, is set to launch its first all-electric urban vehicle in 2013 - two years ahead of schedule. Volkswagen will unveil its electric offering in two years' time, while Daimler is due to present an electric version of its "Smart" car and a battery-run version of its Mercedes A Class later this year.
Unions have been in favor of government support, especially since it is estimated that 30,000 new jobs could be created by the e-car sector in the coming years.
"So workers (in the automobile sector) do not have to fear that their jobs will be axed as a result of more electro-mobility," said Berthold Huber, head of Germany's metalworkers union.
But state subsidies to promote e-mobility are not without controversy. Germany's Monopolies Commission, a body which advises the government on economic competition issues, has rejected the implementation of state support for electric cars.
According commission head Justus Haucap, it is "completely unclear whether electric cars really have a future or will be replaced by another technology," he told the Euro am Sonntag newspaper.
Haucap said he did not see any market failure that "could justify such a drastic subsidy" and hoped that an e-car subsidy would not be the "next bit of nonsense" to follow policies such as "cash for clunkers" or its renewable energy law, which promotes the use of solar and wind power.
The exact outline of the government's electric car push will become clearer in the new few days. The issue is to be discussed by the German cabinet on Wednesday and a final policy decision is expected shortly thereafter.
Author: Dirk Kaufmann (jam)
Editor: Sam Edmonds