Some issues are sacrosanct for the German auto industry, and the subsidy on diesel fuel has traditionally been one of them. Volkswagen and its rivals have turned this €8 billion-tax break into a big selling point for diesel cars.
So it may seem surprising to hear calls for an end to that policy coming from the executive suite in Wolfsburg. But that’s exactly what Matthias Müller, Volkswagen’s CEO, suggested during an interview with Handelsblatt, saying the tax breaks should be gradually shifted toward environmentally friendly technologies.
“I’ve become convinced that we should question the sense and purpose of the diesel subsidies,” he said. “If the switch to environmentally friendly e-cars is to succeed, diesel combustion engines can’t continue to be subsidized the way they have been forever.”
Though Germany’s annual car tax is higher for diesel models, subsidies for diesel fuel generally offset those costs, since the tax on diesel is roughly 18 cents less per liter (68 cents per gallon) than on gasoline. Ending those subsidies would almost certainly reduce sales of diesel models, as well as revenues for VW and other carmakers.