Merkel Cabinet Rolls Out $1.1 Billion to Spur Electric Car Sales

  • Federal cash to be split on new car rebates, building chargers
  • Electric cars may gain 8% of vehicle market share by 2025

Chancellor Angela Merkel’s cabinet signed off on a package of finance worth 1 billion euros ($1.1 billion) to lure Germany’s motorists into buying electric cars.

A third of the money will go for rebates for buyers of all-electric and hybrid vehicles, and the rest will fund a nationwide network of roadside battery chargers, said Economy and Energy Minister Sigmar Gabriel.

The subsidies will act as a catalyst to spur sales of electric vehicles “right along the value-chain,” Gabriel said in a statement after a cabinet meeting in Berlin on Wednesday. The rebates mean electric cars will “find more inroads into our everyday lives,” he said.

The funds will do little to shift German motorists away from diesel and gasoline cars made some of the nation’s largest manufacturers, including Volkswagen AG, Daimler AG and BMW AG, members of Merkel’s Cabinet said this month. Merkel in 2011 brokered an informal agreement with the car industry to put 1 million electric cars on German roads by 2020, though sales to date are well below that level.

About 12,000 new all-electric cars and 33,000 new hybrids were sold last year in Germany compared with 3.2 million new registrations in total, government data show.

The rebates as well as a plan to build 15,000 public battery charging stations along primary roads may prompt sales of about 500,000 vehicles by 2020, Environment Minister Barbara Hendricks said on May 10. A significant market for electric cars will develop from the point the fleet cars are sold on, said Hendricks.

Transport Minister Alexander Dobrindt last month likened the sales trajectory of electric cars to flatscreen televisions, which took eight years to supplant the cathode-ray tube. 

As much as 8 percent of all new car registrations in Germany in 2025 will be electric cars, according to a forecast by the Center of Automotive Management in Bergisch-Gladbach, a German research group.

The rebates reach 4,000 euros for all-electric cars and 3,000 euros for hydrids, with the costs born equally by the government and industry. Rebates apply to cars with a maximum showroom price of 60,000 euros, meaning luxury electric cars like Tesla Motors Inc.’s Model S sportscar won’t benefit.

Merkel’s government is fine-tuning a national climate protection strategy for 2050, which requires the transport industry to accelerate reductions in emissions. The sector is responsible for about a fifth of all emissions in Germany.