After Years Without One, Germany Finally Approves Clever Incentive Scheme For Plug-in Cars, Funded In Part by The Auto Industry

It’s the biggest automotive market by volume in Europe and is home to Volkswagen, Daimler and BMW — not to mention their associated brands like Audi, Porsche, Mercedes-Benz and Smart. It also happens to be a world-leader in solar power, thanks in part to forward-thinking feed-in energy tariffs that drove more than fifteen years of exponential growth in domestic and commercial photovoltaic installations.

Germany wants the auto industry to pay for half of all plug-in car incentives.

Germany wants the auto industry to pay for half of all plug-in car incentives.

But while Germany has been forward-thinking on clean, domestically generated power, it has historically dragged its feet on the subject of electric car incentives. Rather than offer consumers financial incentives to make the switch to an electric car, it has argued that incentives can artificially inflate electric car prices. Essentially, it has suggested, offering incentives to customers for buying an electric car encourages automakers to artificially raise their car’s sticker price to an amount commensurate with whatever incentives being offered: the exact opposite of what’s really needed for electric cars to reach mass-adoption status.

The incentive program is designed to help Germany reach its lofty 1-million EV target by 2020.

The incentive program is designed to help Germany reach its lofty 1-million EV target by 2020.

Consequently, Germany’s attitude thus far toward electric cars — despite setting its own lofty goal in 2010 of having 1 million electric cars on the nation’s roads by 2020 –has been to rely on free-market economics and healthy competition to drive down the price of electric cars and encourage electric car mass-adoption

To date, that policy hasn’t worked, which is why Germany is now launching its own €1.2 billion ($1.4 billion) electric car incentive program designed to help it rapidly accelerate the number of plug-in cars on Germany’s roads. But unlike most electric car incentive schemes around the world, where governments singlehandedly foot the bill for the good of the nation, Germany’s incentive scheme is slightly different.

That’s because instead of being able to benefit from the incentives by rising sticker prices — Germany’s original fear with plug-in incentive programs — automakers will have to pitch in too, shouldering half of the cost of the incentive for each customer. Importantly too, only cars with a sticker price of under €60,000 are eligible for the discount: those buying new cars like the BMW i8 plug-in hybrid, various high-end Mercedes-Benz plug-in hybrids and both the Tesla Model S and Tesla Model X can’t apply for the discount.

In this way, Germany’s new plug-in car incentive program ensures that funds are spent where they’re most needed: encouraging affordable mass-market electric cars that average Germans can afford — not high-end luxury plug-in cars the wealthy could afford with (or without) incentives.

As Reuters and electrive reported earlier, German Transport Minister Alexander Dobrindt announced this morning that the German Government had come to an agreement with Volkswagen, Daimler and BMW under which electric car buyers in Germany will be awarded a €4,000 discount off the price of their new car, while those buying a plug-in hybrid will enjoy a €3,000 discount. While there’s no limit to how many cars will be eligible for the scheme, simple math suggests that the funds secured will help more than 400,000 plug-in car buyers obtain a discount for their new car.

Smart ForTwo ED

Right now, less than 0.1 percent of all cars in Germany are electric.

At the same time, Germany has committed to investing €300 million into a massive expansion of electric vehicle charging across the country. Of the funds committed to charging infrastructure development, the German government says it will funnel €200 million of the funds into DC quick charging stations, something it says should enable more than 5,000 new DC quick charging stations to be erected across the nation. The remaining €100 million will be spent on normal AC level 2 charging stations, which will be cited at places where owners are likely to leave their cars for extended periods of time and thus do not need rapid charging provision.

Finally, Minister Dobrindt committed to an increase in the number of electric vehicles in the German federal government’s fleet, earmarking €1 million to increase the number of plug-in vehicles used on official government business.

As things currently stand, less than 0.1 percent of all cars on Germany’s roads are powered by electricity. The rest are powered by gasoline or diesel, with a slight bias (around 5 percent) towards gasoline. In order for Germany to reach its 2020 goal, it needs to increase proportion of electric cars on its roads to at least 2.2 percent.

That might seem like an impossible goal, but it’s worth noting here that in Norway — where two thirds of all new cars sold last month were either electric or hybrid  — electric cars account for around 2.6 percent of all registered cars on the roads. It’s no secret that Norway managed such an impressive market penetration by offering generous incentives for electric car buyers, including exemption from sales tax as well as free parking and charging in certain cities and access to bus lanes.

Luxury plug-in cars with a sticker price over €60,000 won't be eligible for the discounts.

Luxury plug-in cars with a sticker price over €60,000 won’t be eligible for the discounts.

As a far larger country with a far larger number of cars on the road — 45 million versus the 2.6 million on the road in Norway — Germany may not be able to offer quite the same perks as its northern neighbors in order to encourage more electric cars.

But given the ongoing fallout surrounding the Volkswagen dieselgate scandal — and persistent rumors that other automakers from Germany may also be guilty of similar emissions deception — we think Germany’s new incentive program is exactly what’s needed to keep automakers focused on switching to electric cars without encouraging them to put up prices.

And that, we think you’ll agree, is good news for everyone.

(Those who can speak German may find the above video interesting. Those who can’t speak German can still watch it — but be advised the auto-generated captions aren’t great!)

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