According to Chancellor Angela Merkel’s Christian Democratic Union party, the German government will double the existing subsidy on electric vehicles to € 6,000 (6 6,720), with total incentives rising to ,000 9,000 (10 10,080) when existing contributions from manufacturers are included.
Potential car buyers will also benefit from a temporary reduction in the country’s sales tax from 19% to 16%.
The incentives are part of a sweeping 130 billion (14 145 billion) package approved by the German government late Wednesday night.
Asked about the incentives on Thursday, German Finance Minister Olaf Schulz said they were part of a broader effort to help with climate change. “It’s about renewable energy. It’s about all the climate-related activities that are needed to reach one [carbon] Neutral economy in 2050. We have to start now, ”he told CNN.
The overall stimulus package is equivalent to 4% of the country’s annual economic output. Combined with previously announced spending and tariff breaks, the total amount of emergency stimulus in Germany has now reached exactly 14% of GDP.
These incentives could spur the initiative of German artisans, including Volkswagen, to produce and sell more electric cars. Volkswagen, owned by Audi, Porsche, SET and Skoda, plans to spend 33 33 billion ($ 37 billion) on electrical development by 2024, expanding into new businesses, including infrastructure and battery production charges.
The global auto industry has already seen a two-year decline in sales before the coronavirus epidemic hit, forcing factories and dealerships around the world to close. Sales have left a shock this year, and there are few signs of a big return.
“The industry has fallen into a dark lining and although it has been able to rise a few steps back, there is still no sign of light,” said Klaus Ohrab, head of the survey department at Ifor.
Still, electric cars can power rebounds. According to research firm Canalis, the European market for electronic vehicles and plug-in hybrids grew by 2% in the first quarter of 2020. The two car divisions now account for more than 7% of all new cars delivered on this continent.
Chris Jones, chief analyst at Canalys’ automotive sector, said the “impressive” results for electric vehicles could have been better because of the epidemic disruption. According to Canalis, moving forward, Germany’s new subsidies and the introduction of electronic versions of already popular models should help keep this trend going.
Germany’s new stimulus package was bigger than analysts had expected. In addition to electric car incentives, this includes money for green investments, tax breaks and relief for families with children.
“After five years of fiscal surpluses and a reduction in the German public debt ratio … the package again shows that Germany is ready and able to spend when it is important,” said Holger Schmidt of Bernberg Bank.
– Nadine Schmidt, Fred Plitzen and Mark Thompson contributed to the reporting.