German Electric-Car Rebates Seen as Game Changer for Slow Sales

  • BMW CEO calls on German government to offer incentives
  • Renault's Ghosn says incentives could be big sales boost

Harald Krueger, chief executive officer of Bayerische Motoren Werke AG (BMW), poses for a photograph on the first day of the 86th Geneva International Motor Show in Geneva, on Tuesday, March 1, 2016. Photographer: Jason Alden/Bloomberg

Automotive executives are counting on financial backing from German Chancellor Angela Merkel’s government to kickstart sluggish electric-car demand in Europe’s biggest economy as consumers shun the vehicles in part because of their higher price tag.

“We need government support to boost sales,” BMW AG Chief Executive Officer Harald Krueger told reporters at the Geneva International Motor Show on Tuesday. “We’re in positive talks with the German government and I expect there will be a resolution soon.”

Harald Krueger at Geneva International Motor Show.

Photographer: Jason Alden/Bloomberg

Merkel hinted last month that she may back subsidies to reach her 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 -- a tiny fraction of the more than 3 million cars bought each year in Germany, which has historically leaned on diesel technology to reduce emissions.

The industry sees any rebates in the country as a potential game changer due to the size of the German market, which accounts for nearly a quarter of all auto sales across Europe. Merkel’s government is split on the matter, with Vice Chancellor Sigmar Gabriel in favor of using state funding -- coupled with financial support from the industry -- to provide 5,000 euros ($5,400) in incentives per car to offset the higher price. Finance Minister Wolfgang Schaeuble questions whether it’s the role of the government to fund such a program, especially given the costs for caring for an influx of refugees. That leaves Merkel to make the call.

Early Investors

“If Germany takes important measures to support electric cars, it’s going to help us a lot to boost the volume,” Renault SA CEO Carlos Ghosn said in Geneva.

Carlos Ghosn in Geneva

Photographer: Jason Alden/Bloomberg

Renault and its alliance partner Nissan Motor Co., also run by Ghosn, were early investors in electric cars with the Leaf and Zoe models. The two automakers are pursuing a goal of delivering 100,000 of the vehicles annually after selling nearly 85,000 last year. While plowing billions into developing the technology, Ghosn government support would provide a much-needed boost.

“We will benefit from economies of scale, and we will lower the cost as much as possible, but we don’t want to be in a situation where you make so many losses on electric cars that you stop development of the technology,” Ghosn said. "We are in many markets in a break-even or even positive situation, but again, we are the leader in electric cars, and we are by far selling the most."

Rebate Offerings

Executives point to France, where the government last year started offering a 10,000-euro rebate to drivers trading in diesel-powered cars older than 14 years, and Norway as examples of how governments can aid in the development of the market for the green technology. Renault said last month that the French incentives helped boost electric sales in its home market.

In Norway, electric cars enjoy a plethora of perks. There’s no value-added tax on purchases nor a one-time fee imposed on regular cars. There is also free charging, free parking and an exemption from congestion charges. On top of that, electric-car owners are allowed to drive in bus lanes to avoid traffic. The result? Nearly 26,000 electric cars were sold in Norway last year -- accounting for about 17 percent of the overall market.

QuickTake Cleaner Cars

Krueger said industry executives will gather again with Merkel in April to discuss how to boost demand in Germany after meeting with her on the matter last month. BMW’s current electric-vehicle offerings include the i3 city car and i8 sports car. The CEO said that along with rebates, increasing the number of charging stations and boosting the distance that models can drive without needing to recharge are also key.

“We need to get our three-pronged approach right,” Krueger said. “That is, offering cars with enough electric range, having sufficient charging infrastructure and offering financial incentives."

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