Germany’s low-emission recovery package announced

5 June 2020

As part of a coronavirus (COVID-19) economic recovery package, the German Government has leant heavily into incentivising green mobility. Schemes to boost the sales of low- and zero-emission cars will partner investments in green transport infrastructure. Conversely, petrol- and diesel-powered vehicles do not feature in the package.

Speaking with reporters, Finance Minister Olaf Scholz outlined the importance of contributing to the ′future transformation of our society.’ He went on to say, ′that is why there is an important climate protection program included, focused on the technological shift in the automotive industry and the electrification of vehicles.’

Electrified incentives

The Government document, ′Fighting Corona, securing prosperity, strengthening sustainability‘, outlines measures to replace polluting vehicles with more environmentally-friendly models.

The federally-backed buyer incentive scheme will double to €6,000 for battery-electric vehicles (BEVs) and fuel-cell electric vehicles (FCEVs) costing less than €40,000. This will include models like the VW ID.3, Opel/Vauxhall Corsa-e, BMW i3 alongside imported models. When paired with a manufacturer bonus of €3,000, customers will be able to save €9,000 on a zero-emission cars. Meanwhile, more expensive BEVs and FCEVs costing above €40,000 but below €65,000, like the Audi e-tron, will be eligible for €5,000 in government subsidies, alongside a €2,500 OEM bonus.

Plug-in hybrids (PHEVs) will receive slightly lower subsidy rates. Those costing €40,000 or less will be eligible for an increased federal contribution of €4,500 and a manufacturer bonus of €2,250. Where they cost €40,000 to €65,000, PHEVs will receive a €3,750 government subsidy and a €1,875 OEM bonus. These incentives will be available until December 2021.

New-car buyers will also benefit from a lowering of value-added tax to 16% from 19% between 1 July and 31 December 2020. This will be one of the few measures that will also apply to diesel- and petrol-powered vehicles. A 0.25% tax rate will be applied to BEVs in corporate fleets costing up to €60,000. Previously, only fully-electric cars costing less than €40,000 were eligible for this rate.

An investment of €2.5 billion will also be made in the expansion of EV charging infrastructure and battery-cell production. All fuel stations will be obligated to offer electric charging points. Efforts to increase charging points at public buildings, like day-care facilities, hospitals and sports centres, will be intensified too. Some €1 billion will also be invested in the research and development of future technologies and processes in 2020 and 2021.

German automotive reaction

In a statement, the German automotive industry association (VDA) confirmed ′companies in the automotive industry are undergoing an unprecedented transformation. It affects manufacturers and suppliers as well as car dealerships and garages. Without a resilient economic outlook, they will not be able to shape the further development towards climate protection and digitisation at the pace and to the extent Germany needs.’

The association did express regret that the proposal for a broad-based and directly effective economic stimulus package was only partially included in the package that was passed. ′In order to remain competitive and to think climate protection and the economy together, we will continue to need a mix of offerings that also includes modern and efficient combustion engines,’ the VDA went on to say.

The Association of International Motor Vehicle Manufacturers (VDIK) called the stimulus package an important step towards overcoming COVID-19. ′The overall package can provide a broad economic stimulus from which all affected industries will benefit’, said Reinhard Zirpel, president of the association. ′In addition, the program will boost further innovations in mobility. The increased promotion of alternative-drive systems, charging infrastructure and environmentally-friendly commercial vehicles points in the right direction.’

The VDIK stated that, ideally, the existing environmental bonus directive should be amended at short notice and apply from the announcement of the stimulus package. Zirpel emphasised that ′the rapid implementation of all the measures agreed is particularly important to prevent further consumer reluctance to buy.’