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The German government on Wednesday unveiled a €1bn programme to subsidise the sale of electric cars, as it seeks to protect the country’s car industry from the rise of upstart competitors like Tesla of the US.

The deal comes at a time when the Volkswagen emissions scandal has cast a pall over the entire German car industry. Last Friday the company reported the biggest loss in its history as it almost tripled its provision for the cost of fixing diesel-powered cars fitted with software to cheat during emissions tests.

Under the programme unveiled on Wednesday, customers would be given a subsidy of €4,000 to buy an electric vehicle and €3,000 for a plug-in hybrid, with the government and the car industry splitting the cost 50:50. The volume of subsidies is to be capped at €1.2bn, with the government and carmakers paying €600m each. Cars costing more than €60,000 will not be eligible for the scheme. 

Berlin would also spend €300m on charging infrastructure over the next three years, including on building 15,000 new stations. 

Sigmar Gabriel, economics minister, said the programme was designed to boost the number of electric cars on German roads from 50,000 currently to more than 500,000, although he did not specify a date. An earlier target of 1m cars by 2020 has been quietly scrapped as overly ambitious.

Mr Gabriel said the aim was to secure the future of the German car industry and ensure that the new generation of car batteries were manufactured in Germany.

“The car that will emerge in 10 to 20 years will be completely different to what we have now,” he added. “And that’s why it must be the common goal of business, unions and politicians to advance the development of these cars on Germany’s domestic market.”

Mr Gabriel denied the scheme amounted to a taxpayer subsidy to a sector that churns out billions of euros in profits.

He compared the move to the creation of Airbus, the pan-European aerospace and defence group, at a time when the global market for passenger aircraft was dominated by Boeing.

Germany’s car industry was “in a very similar situation”, with digital and battery technology for the cars of the future increasingly being developed outside of Europe. 

But he also said the government wanted to see a “cultural change” in the car industry.


Rise in electric car sales in France last year, thanks to the country’s subsidy scheme

Too often, carmakers had used “influence, lobbying, threats of job losses” to push back against government regulation, for example on car emissions, a strategy he described as “regressive”.

“They should meet future challenges and not keep coming to us and saying ‘This just won’t do’,” he added.

The subsidies were sharply criticised by environmental groups. “We believe that drivers of gas guzzlers should pay for this, not the general public,” said Anton Hofreiter, leader of the Greens’ parliamentary group in Germany.

“The government has missed another opportunity to finally launch a modern transport policy.”

Patrick Hummel, analyst at UBS, said the €60,000 cap would likely benefit mass-market manufacturers such as Renault, Nissan, Peugeot and VW, rather than Daimler’s Mercedes-Benz unit or VW’s higher end Audi and Porsche cars. The price of BMW’s electric i3 model starts at €35,000.

The subsidy scheme brings Germany into line with other European countries that have long offered “bonus payments” to buyers of zero-emission cars. In France and the UK, buyers can receive up to €6,300 and £5,000 respectively.

Julien Jarmoszko, analyst at S&P Global Market Intelligence, said the effect from the European subsidies has been clear. “Smaller, emission-efficient cars have gained market share markedly at the expense of more polluting cars,” he added.

France’s subsidy scheme spurred a 63 per cent jump in electric car sales last year, to 17,266 units.

It also generated a 43 per cent jump in hybrid vehicle sales, to 61,619, according to the CCFA auto association. The combined market share of the two vehicle types remains slim, however, at just over 4 per cent. 

Last year there were 146,161 registrations of electric cars in the EU — only about 1 per cent of new sales, according to the European Automobile Manufacturers’ Association.

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