• Vice Chancellor Gabriel proposing incentives to boost demand
  • Schaeuble against using government funding to increase sales

Chancellor Angela Merkel’sgovernment is pushing for an agreement within the next month to boost electric car sales in Germany as demand for the environmentally friendly vehicles fails to take off in the country.

“Germany wants to be the leader in this new age of the automobile,” Vice Chancellor Sigmar Gabriel said in an e-mailed statement on Wednesday. “The government and automobile industry wish to develop a common action plan by March to do that.”

Gabriel, Merkel and other government ministers met Tuesday night in Berlin with Daimler AG Chief Executive Officer Dieter Zetsche, Volkswagen AG CEO Matthias Mueller and BMW AG CEO Harald Krueger to discuss how they can reach a stated goal of 1 million electric cars on German streets by 2020. To date, just over 30,000 of the vehicles have been sold in the country, which has historically leaned on diesel technology to reduce emissions.

While Gabriel wants to shell out about 2 billion euros ($2.2 billion) in incentives to offset the higher price, Finance Minister Wolfgang Schaeuble is questioning how the government would pay for such a program given the needed funding for asylum seekers. Merkel, who is keen to avoid another rupture within her coalition after negotiating a deal last week to end a spat over the refugee crisis, is searching for a compromise between the two ministers that’s likely to include incentives and tax breaks, according to a government official familiar with the matter.

Gabriel, who is pushing for about 5,000 euros in incentives per car through 2020, said Tuesday that any government program should in part be funded by the automobile industry, which must also make it an aim to develop and build the battery technology needed for the cars in Germany.

“Electromobility, along with digitalization, is a deciding factor for the future of the automobile industry,” said Gabriel, who heads junior coalition partner, the Social Democrats.

With Germany planning to provide billions of euros to care for the more than 1 million asylum seekers who poured into the country last year, Schaeuble has come out against spending government money on an incentives program. The finance minister, who is a member of Merkel’s Christian Democratic Union, says the government should focus instead on expanding the infrastructure needed to fuel the vehicles. The country currently has about 5,600 charging plugs.

“This has to be a very comprehensive effort by industry and government,” Jim Farley, Ford Motor Co.’s executive vice president for Europe, Middle East and Africa, said in an interview. “To do that we need a variety of actions, improving the infrastructure such as universal plugs to charge vehicles. In addition to that, there needs to be financial incentives, the math just doesn’t work for most customers as the cars are too expensive.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE