Germany Mulling Tax Breaks For Electric Vehicles

The German government may be looking to give tax breaks to EVs to jump-start sales.

According to Bloomberg, German officials have been debating how best to spur the lagging plug-in car submarket in what is Europe’s largest economy.

Finance Minister Wolfgang Schaeuble opposed a plan put forth by Vice Chancellor Sigmar Gabriel for cash rebates of 5,000 euros, so tax incentives may be used as a compromise. It’s not clear if tax breaks would be the only approach or if they would be combined with cash rebates.

“Cash rebates cost billions, which is hardly feasible in view of the budget situation,” Peter Ramsauer, a member of Merkel’s party bloc and chair of the German parliament’s Economic Affairs Committee, said in an interview with Bloomberg. “Making part of the purchase price tax-deductible is an incentive that can make sense,” he said. Ramsauer once worked as a transportation minister in German Chancellor Angela Merkel’s administration.

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Europe surpassed the U.S. last year for plug-in electric vehicle sales. Also last year, Merkel implied that she may support subsidies as a way of reaching a goal she set of 1 million EVs on German roads by 2020. This despite the fact that Schaeuble will be setting aside money for the influx of refugees from the Middle East. Germany currently has a budget surplus.

The German automotive market is about 3 million units a year, yet only 30,000 electric vehicles have been sold, total, in the country, in part because there’s been a heavy focus on diesel powertrains for emissions reduction. The German market accounts for almost a quarter of all European vehicle sales.

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France and Norway are already offering varying incentives and could be used as models for Germany. In France, drivers who trade in a diesel-powered vehicle that’s older than 14 years get a 10,000-euro rebate, while Norwegian EV owners get to avoid the value-added tax and the one-time registration fee while also receiving free parking and free charging. They’re also exempt from congestion charges and may drive in the bus lanes. American plug-in car buyers can get a federal tax credit of up to $7,500.

BMW CEO Harald Krueger has said that the auto industry will need support from the government in order to generate more EV sales, and Merkel has said that the industry should bear some of the costs of incentives, especially to offset the higher price of EVs. Industry officials are scheduled to meet with Merkel again in April.