German government agrees proposals for tax relief on EVs

Published On : 09/05/2024

BERLIN (Reuters) -Germany’s coalition government has agreed to a proposal for tax reductions to promote the use of electric cars, after last year abruptly ending a subsidy programme designed to help speed up the green transition.

Germany, Europe’s largest economy, is aiming to improve the uptake of EVs, new registrations of which fell by 36.8% in July year-on-year, official data show. Apart from EVs’ affordability, German consumers have been concerned about a lack of sufficient charging stations and the range of electric vehicles.

Under the draft approved by Chancellor Olaf Scholz’s cabinet on Wednesday, companies would be able to deduct up to 40% of the value of newly purchased electric and qualifying zero-emission vehicles from their tax bill in the year of their purchase, falling progressively to 6%.

The government estimates that the measure will have an average annual cost of about 465 million euros ($514 million) between 2024 and 2028.

Additionally, electric and zero-emission company cars that are worth 95,000 euros or less will now qualify for preferential tax treatment, up from 75,000 euros or less previously, according to the proposal that will now go to parliament.

Economy Minister Robert Habeck said on Tuesday that the government would continue to support the German car industry’s transition to EVs after Volkswagen said that it might close plants in Germany for the first time in the company’s history.

The new measures are part of the government’s package to stimulate economic growth.

Environmental and social groups had earlier doubted that the measures would boost EV sales and criticised that the money would mainly benefit top earners.

Auto industry association VDA meanwhile hailed the government’s plans.

“This is an important and correct signal that is urgently needed, especially given the abrupt discontinuation of the environmental bonus at the end of last year and the weaker demand for electric vehicles,” VDA said on Wednesday.

($1 = 0.9045 euros)

(Reporting by Holger Hansen and Markus Wacket; writing by Louis van Boxel-Woolf and Thomas Seythal; editing by Miranda Murray and Mark Heinrich)

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