Berlin Summit

Recharging Ms. Merkel's E-car Strategy

angela merkel chancellor German electric cars VW e-car E-Golf hybrid plug in Source ddp images Joerg Sarbach
Can Angela Merkel recharge her e-car strategy?
  • Why it matters

    Why it matters

    German incentives to buy electric or hybrid cars could boost the e-car market and help VW, BMW, Daimler, Tesla, Toyota and others to sell their electrically powered vehicles in Germany.

  • Facts

    Facts

    • Chancellor Angela Merkel had proclaimed there would be 1 million electric cars on German roads by 2020, but that looks increasingly unlikely.
    • Vice chancellor and economics minister, Sigmar Gabriel, has called for e-car buyer incentives and has backing from some members of his Social Democrats party.
    • Germany’s finance minister, Wolfgang Schäuble, and the government’s transport minister, Alexander Dobrindt, both from Ms. Merkel’s Christian Union parties, oppose a so-called buyer’s premium.
  • Audio

    Audio

  • Pdf

As German chancellor Angela Merkel prepares to face the bosses of Daimler, VW and BMW at top-level talks on Tuesday, she’ll be looking at political incentives to help them to clean up their act.

Ms. Merkel’s target of having 1 million electric cars on the road by 2020 is still far from being realized. By the end of 2015, around 31,000 e-cars were registered in Germany and 141,000 hybrids, data from Germany’s Federal Motor Transport Authority show. This pales compared to the total of 47 million cars in Germany.

German carmakers complained last month that political will was lacking to develop the German e-car market, which is also small compared with developments in other European countries or the United States and Japan.

Some politicians have joined the carmakers in calling for tax incentives or buying premiums to boost the sale of e-cars in Germany. Such schemes could also help Germany’s carmakers, from VW to BMW to Mercedes, in developing and selling the electric cars, where they have trailed rivals such as Toyota and Silicon Valley-based Tesla Motors.

“Germany cannot claim to be a leading market or a market leader in electromobility.”

Stefan Bratzel, Centre for Automotive Management

Horst Seehofer, the state premier of Bavaria, where BMW and Audi are headquartered, has become a champion of electric vehicles. Mr. Seehofer, who is also leader of Ms. Merkel sister party Christian Social Union, said he wants decisive action on electric vehicles, and he demanded a decision on direct purchasing assistance for e-cars.

“We want to make a key technology, which is currently engaged in a brutal global competition, future proof,” he said.

With the announcement he’s aligned himself firmly with Social Democratic Party leader and vice-chancellor, Sigmar Gabriel, who has long been campaigning for buyers’ premiums.

The premiums could be as high as €5,000, or $5,425, per vehicle. Both purely electric vehicles as well as plug-in hybrid vehicles should be entitled to the subsidies. According to the plan, the federal government will set up a fund to pay for the incentives and car makers will also contribute to it, €1,500 to 2,000 per e-car. Chancellor Merkel was ready to ask the industry to promise these incentives mid last year, but her own faction held her off.

At the automobile summit on Tuesday, the Chancellor will have her chance. The coalition agreement, however, stands in her way. It rules out direct help, as conservative Finance Minister Wolfgang Schäuble will no doubt remind his Christian Democrat colleague Ms. Merkel. He has openly expressed his disinclination to put money into such a scheme.

 

Government Subsidies for Electric Cars e-cars hybrid-01

 

The budget committee spokesman in Germany’s parliament, Eckhardt Rehberg, who is also a member of Ms. Merkel’s party, has spoken out against the subsidy plans, saying that the automobile industry is “economically strong enough that it doesn’t need to be supported by the taxpayer.”

In spite of the fact that Germany’s car-making giants say they want to grow the electromobility sector, they seem to be dragging their feet on the issue.

Some analysts say the car industry’s strong profits are one reason why they’ve held out against a purchase premium.

Of course, the sector itself does want to see e-mobility grow and become a sizeable market. Last year, only 23,500 electric or plug-in hybrid cars were sold in Germany, compared with total car sales of 3.2 million.

“Germany cannot claim to be a leading market or a market leader in electromobility,” said Stefan Bratzel of the Centre for Automotive Management in Bergisch Gladbach.

As a rule, German manufacturers leave the lobbying work up to the industry association, the VDA. A year ago the body had been demanding tax incentives such as increased depreciation for company fleets. But over the weekend Matthias Wissmann, president of the VDA, put direct incentives to buy on the table for the first time.

 

Biggest Electric Car Markets updated

 

The industry is convinced that it’s practically impossible to entice private customers to buy electric cars. As an example, a customer can drive away in the most rudimentary version of VW’s tiny two-door, the Up!, for just under €10,000 ($11,393), but to get behind the wheel of the electric version, the E-Up! one is looking at around €26,900 ($29,190). A lot of money for not a lot of car.

Klaus Mittelbach, chairman of the Association of the Electrical and Electronics Industry, said there are other priorities: the most important thing in getting e-cars on the road is the infrastructure.

“We need more charging stations,” he said, including an urgent need for 10,000 normal charging stations and 1,000 rapid-charge stations. At the moment there are only half those numbers. The electrification of government fleets could also help accelerate the process.

This could actually happen in the near future. The German government plans to increase the proportion of electric vehicles in public service to 20 percent by 2017 and 30 percent by 2019. The Ministry of Economy estimates this will add €55 million ($60 million) to the cost of a fleet of 30,000 vehicles. Germany’s lower house of parliament, the Bundestag, has plans that in the future, representatives will only be chauffeured in electric vehicles.

When the current contract with a private car service comes to its end, the Bundestag chairman and Christian Democrat, Norbert Lammert, wants to engage the car service operations from Bw Fuhrpark Service, or Bw Fleet Service, a subsidiary of the German military and jointly operated by state-owned railway firm Deutsche Bahn. This government-controlled company should prioritize the use of electric vehicles.

The environmental organization Greenpeace on Sunday demanded that instead of introducing direct financial incentives to buy E-cars, it would be more effective to scrap tax rebates on diesel fuel. That would bring in €7 billion, they say, enough to convert the country’s entire public bus fleet to electric.

 

Daniel Delhaes reports on politics, transport and airlines from Handelsblatt’s Berlin office. Regine Palm is a Handelsblatt editor, writing about commodities, machine makers and the trade fair industry. Christian Schnell covers the auto industry in Germany. Peter Thelen writes about social security systems, the job market and labor topics for Handelsblatt. Gilbert Kreijger, an editor with Handelsblatt Global Edition in Berlin, contributed to this article. To contact the authors: delhaes@handelsblatt.compalm@handelsblatt.comschnell@handelsblatt.com and thelen@handelsblatt.com

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