Ch Parliament Pushes for Tax Breaks on E-Cars, Industry Reacts Mixedly
Industry Divided Over Federal Government's Electrified Vehicle Initiative
Auto industry reacts with a mix of approval and skepticism to the black-red government's proposed tax breaks on electric cars - an initiative that could potentially enhance market penetration but might fall short on key incentives.
Germany is eager to ramp up the number of electric vehicles on its roads, and the federal government's new tax breaks strategy seems promising, according to Hildegard Müller, head of the VDA automotive industry association. UBS analyst Patrick Hummel adds, "We anticipate this additional purchase incentive will further escalate demand in the crucial fleet segment throughout the year, benefiting German manufacturers especially due to their market dominance in commercial vehicles."
Despite the optimistic projections, Thomas Peckruhn, interim President of the Central Association of the German Automotive Industry (ZDK), notes concerns about the limited scope of tax breaks. Specifically, private households and leasing companies are likely to be excluded. "While this measure is not detrimental, it fails to yield any significant advancement - it's merely a first step," says Peckruhn.
Essential incentives for electromobility's continued rollout, such as lower charging prices and greater charging network transparency, remain pressing issues, Peckruhn emphasizes.
Jürgen Resch, CEO of the German Environmental Aid (DUH), expresses reservations that the proposed tax breaks could lead to reduced revenue for municipalities due to lower trade taxes. Additionally, incentives for smaller cars, as in France, are conspicuously absent from the proposed plan.
The finance ministry's draft indicates future company car tax could be written off at 75% in the year of acquisition, compared to the typical six-year linear depreciation. High-end automakers will particularly benefit from the increased gross list price limits for the company car tax, shifting from 70,000 to 100,000 euros.
Background
The proposed tax breaks form part of a broader initiative to boost both private and corporate investment in electric mobility, with these measures set to take effect in July 2025 [1]. The objective is to rectify previous setbacks, such as the dramatic dip in electric vehicle sales following the discontinuation of direct purchase subsidies in 2023 [1][3].
Research suggests that direct purchase incentives (such as grants) have a stronger immediate impact on sales compared to tax write-offs and depreciation schemes, which are more beneficial for businesses and wealthier individuals [5][1]. However, the ongoing debate revolves around whether these proposals alone are sufficient to reach the government's ambitious goal of 15 million electric cars by 2030 [1].
Key Incentives at a Glance
| Incentive Type | Target Group | Likely Effectiveness ||-----------------|-------------|-----------------------|| Special Depreciation (AfA) | Businesses | High for fleet renewal|| Corporate Tax Relief | Businesses | High for company cars || Direct Purchase Subsidies | Private consumers | Previously high, now absent || Low-income leasing, price cuts | Low-income consumers | Needed, but not yet in place|
Sources: ntv.de, als/rts
Keywords: Electromobility, Electric Cars, Association of the German Automotive Industry, German Environmental Aid (DUH), Electricity Price
The automotive industry, represented by the VDA, supports the government's proposed tax breaks on electric cars, believing it will boost demand and market penetration, particularly in the commercial vehicle sector. However, the Central Association of the German Automotive Industry (ZDK) expresses concerns about the limited scope of the tax breaks, suggesting a need for broader incentives such as lower charging prices and greater charging network transparency for the continued rollout of electromobility. Meanwhile, the German Environmental Aid (DUH) raises reservations about potential revenue losses for municipalities due to lowered trade taxes and the absence of incentives for smaller cars, as seen in France. The finance ministry's draft also includes plans for special depreciation (AfA) for businesses, corporate tax relief for companies, and the potential reintroduction of direct purchase subsidies for private consumers, although their effectiveness remains questionable in achieving the government's goal of 15 million electric cars by 2030.
