Germany Intends To Extend Electric Vehicle Subsidy For Environmental Reasons

Germany Electric Subsidy
A state electric car is displayed in a New York State exhibit at the 2019 New York International Auto Show (Photo: Reuters)

Germany's economy ministry and its finance ministry have both expressed intentions of extending the country's subsidies for electric vehicles. The extension is supposedly meant to further increase the sales of electric vehicles in the country and to boost the demand for these types of vehicles for environmental reasons.

The plan has also been seen by some as a way to respond to the slew of recent scandals involving German car manufacturer's diesel emissions. The most notable incident involved Volkswagen caught cheating to pass global emission regulations. Daimler, another German automaker, was also involved in a cheating scandal just recently.

According to documents that were reportedly sent to other German ministries, the economy ministry suggested that the subsidies for new EVs should be extended given that the current program is about to expire. Germany currently provides a US$4,500 incentive for the purchase of new electric vehicles. The program was introduced back in 2016 and is slated to end in June of this year.

Both the German government and major automakers producing electric vehicles share the cost in the financing program. The country's EV subsidy is estimated to cost around US$1.35 billion. However, data has suggested that most of the allocated budget actually hasn't been used. Estimates show that only around US$560 million has been used so far. The country's KBA motor vehicle authority also revealed that only 1 percent of new car registrations in 2018 were electric vehicles.

To further promote the purchase of new electric vehicles, the country's finance minister, Olaf Scholz, previously suggest a number of new measures. These measures to push electric mobility included tax subsidies for corporate purchases of electric cars and bicycles that would last until 2030.

The initiative aims to allow companies who purchase EVs as delivery vehicles to write off as much as half of the acquisition cost. Meanwhile, leasing fees that are allocated to a firm's income are to be slashed from 20 percent to 10 percent. Germany currently has an ongoing tax incentive program for companies that use electric cars and plug-in hybrids under the 0.5 percent rule. However, that program is only valid until 2021.

As of the moment, there has yet to be any official announcement of an extension to the current EV subsidies. The country's economic ministry has also declined to comment until further deliberation is concluded. However, the agencies have had some added pressure from different environmental bodies, which are pushing for more drastic measures to decrease the environmental impact from the country's transport and automotive sectors.

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