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Boosting e-car sales in Germany

Rolf Wenkel / sri (with inputs from agencies)February 1, 2016

As sales of e-cars languish, the government and carmakers are mulling over a new subsidy scheme to create incentives for car buyers. Chancellor Angela Merkel is meeting auto executives Tuesday to discuss the plan.

Deutschland Elektromobilität Symbolbild Tankstelle für Elektroautos
Image: imago/H. Galuschka

The Germans have little interest in electric cars - as evidenced by sluggish sales in the country. In a bid to boost weak demand, there are growing calls for introducing state incentives, together with increased participation from the automotive industry.

German Economy Minister and the leader of the Social Democrats (SPD), Sigmar Gabriel, as well as the head of the Christian Social Union (CSU) party, Horst Seehofer, have already said they are in favor of paying a direct premium to car buyers on purchase.

The federal government in Berlin should determine the scale of the premium and industry participation, said Seehofer, who is premier of Bavaria, the southern German state where carmaker BMW is based.

Still, Finance Minister Wolfgang Schäuble continues to reject a premium on purchase of electric cars, stressing that "it is not the government's job to assist in the sales of cars." Even Transport Minister Alexander Dobrindt, a member of Seehofer's CSU party, has so far been against offering state incentives for stimulating e-car sales, although he would probably be persuaded by party chief Seehofer in time to support the proposal.

A 5,000-euro subsidy?

According to the German news magazine "Der Spiegel," discussions are being held for setting up a fund that facilitates the auto industry's participation in the financing of state incentives to promote e-car sales.

While the premium paid to the car buyer on the purchase of each electric car or plug-in hybrid is expected to be around 5,000 euros ($5,500), about 1,500 to 2,000 euros of this amount is supposed to be co-financed by carmakers, the report noted. Moreover, it added, the government intends to invest in the building of some 16,000 electric vehicle charging stations.

To discuss the proposals, German Chancellor Angela Merkel is meeting the CEOs of carmakers Volkswagen, Daimler and BMW - Matthias Müller, Dieter Zetsche and Harald Krüger, respectively - on Tuesday. The government of Bavaria had already expressed its support for the introduction of the premiums, with the state's Economy Minister Ilse Aigner calling for the participation in the scheme of both the federal government and automotive industry.

Sluggish demand

The demand for electric cars in Germany has remained weak - with a mere 12,363 newly registered e-cars in the country last year, in contrast to a total of around 3.2 million newly registered passenger vehicles. While the government aims to bring a million e-cars a year onto the nation's roads by 2020, the target is viewed by many as unrealistic, citing their relatively high expense as well as the short battery range. The lack of sufficient infrastructure related to charging stations is another factor putting off potential buyers.

"At present, there are about 5,500 public charging stations in Germany and they are too few," laments Matthias Wissmann, head of the German Association of the Automotive Industry (VDA). He calls for an increased focus on the development of electric mobility and more government support.

"Car buyers can be persuaded to opt for electric cars only when they see tangible benefits," said Wissmann, underlining the importance of tax measures and direct incentives to achieve this goal.

Batteries are too expensive

The head of Porsche, Oliver Blume, sees the battery technology as the biggest problem area hindering the rapid expansion of electric cars. Blume calls for renewed efforts for the domestic production of battery cells used in electric cars. "Germany has always strived to keep industrial production in the country and thus ensure the expertise of its workforce," Blume told the German newspaper "Sruttgarter Nachrichten."

Germany needed a battery factory, and the federal government should support the auto industry's efforts to set up battery production in the country, Blume said, adding that in order to bolster the sales of electric cars, public investment in charging stations was more important than offering direct premiums to buyers of e-cars. Quick and high-performance charging stations were of huge significance in this process, he argued.

Alternative proposals

Meanwhile, environmental group Greenpeace suggested that the public bus fleet in Germany be converted and equipped with electric drives, instead of offering buyers premiums for e-cars. The government could finance it by abolishing the diesel tax premium amounting to around 7 billion euros annually, says Daniel Moser, a transportation expert at Greenpeace.

"This not only improves the air quality in Germany, it will save 2 million tons of CO2 also for a lot more than an obtained bonus for electrical autos can," he told news agency DPA.

"An electric car subsidy of about 5,000 euros would be a right measure, if it's properly financed," said Anton Hofreiter, a leader of the Green party. We propose to pull up all gas guzzlers for refinancing and that would represent a real change in transport policy, for instance, by promoting those that contribute to cleaner air for all, said Hofreiter.

The Center of Automotive Management (CAM), based in the German city of Bergisch-Gladbach, has projected how the e-car market would develop over the next 15 years. Its optimistic estimates suggest that the share of electric cars in the total number of passenger vehicle sales worldwide would account for 5 percent by 2020, around 15 percent by 2025 and 30 percent by 2030. But according to more conservative projections, that figure would be a mere 2.5 percent by 2020 and only 15 percent by 2030.