Germany doubles EV incentives, excludes internal-combustion cars from stimulus program

FRANKFURT -- Germany is doubling incentives offered to buyers of battery-powered cars as part of a 130 billion-euros ($146 billion) economic recovery package for the period through the end of next year -- but the government refused pleas for the program to include internal-combustion cars.

Buyers of full-electric cars with a net list price of up to 40,000 euros ($44,815) will be eligible for a grant of 9,000 euros ($10,083), including 6,000 euros from the government and 3,000 euros from automakers.

The threshold means that many high-priced vehicles from premium automakers such as BMW, Mercedes-Benz, Audi and Tesla are not eligible for the full amount. Prices for the Mercedes EQC start at 71,590 euros and Audi's e-tron prices start at around 69,900 euros. Tesla's lowest priced Model 3 just squeezes in at 39,990 euros, according to the government's list of eligible vehicles.

The stimulus will benefit mainly cheaper electric cars such as VW's new ID3 model, which will cost 29,990 euros ($33,589) in Germany when it launches this summer, as well as the Peugeot e-208 GT, which costs 36,600 euros ($40,993), and the Kia e-Niro, which starts at 34,290 euros ($38,406).

The government estimates the cost of the purchase incentives to the taxpayer at 2.2 billion euros ($2.5 billion).

As part of the package, new-car buyers will benefit from a lowering of value-added tax to 16 percent from 19 percent.

The government will also overhaul motor vehicle taxation. From January 2021, cars with emissions of more than 95 grams of CO2 per kilometer will face a staggered tax that will penalize vehicles with high CO2 emissions such as SUVs.

Politicians hope the fresh funds will help to stimulate slow demand.

Registrations fell 50 percent to 168,148 in Germany in May, the KBA motor transport authority said on Wednesday. The drop followed a 61 percent decline in April when showrooms were closed because of coronavirus restrictions. Dealerships were allowed to resume car sales after April 20.

The ZDK German dealers association said it was disappointed that incentives will be offered only for EV sales.

The stimulus program is "not even a drop in the ocean" in helping to move unsold new cars worth around 15 billion euros that are in dealerships and on dealers' books, ZDK President Juergen Karpinski said in a statement.

The reduction in value added tax to 16 percent, limited to six months, will have a very small effect on sales, he said.

Germany's governing conservative and Social Democrats (SPD) coalition agreed on the stimulus package on Wednesday after they had wrangled for days over incentives to boost new-car sales hit by the coronavirus crisis.

Social Democrats opposed offering incentives for vehicles with gasoline and diesel engines, arguing that this would undermine Germany's climate protection goals.

Auto industry executives had lobbied for the stimulus to apply to internal-combustion and electric models. They were supported by the state premiers of Lower Saxony, Bavaria and Baden-Wuerttemberg, home to Volkswagen, BMW and Daimler.

Full-electric cars made up 1.8 percent of new passenger car registrations in Germany last year, with diesel and gasoline cars accounting for 32 percent and 59.2 percent percent respectively. Hybrid cars made up 6.6 percent of registrations.

Other European countries have started to unveil their own stimulus packages. An 8 billion-euro plan in France to aid the auto industry includes incentives for electric vehicles that can reach 12,000 euros with scrapping incentives for eligible buyers.

Reuters and Bloomberg contributed to this report