Germany introduces electric car subsidy, but excludes Tesla

Germany introduces electric car subsidy, but excludes Tesla

Germany ‘s target of one million electric cars on its roads by 2020 stands no chance of being met, but Wednesday’s news the government agreed to contribute 50% to a 1.2 billion euro ($1.4 billion) subsidy fund, should mean their sales might reach half that.

German car manufacturers will be the big winners from the scheme, criticised by local politicians for subsidizing the rich to buy cars they could well afford in the first place. European Union rules mean that all European manufacturers’ electric cars will qualify. Tesla is apparently excluded because its vehicles are too expensive to qualify for the scheme. The new Model 3 would qualify when it finally gets to Germany.

Successful upmarket German car makers like BMW, Mercedes and Volkswagen’s Audi and Porsche are seen as under severe pressure to meet harsh European Union (E.U.) fuel consumption targets for 2021, and a boost to the sales of zero emission (at least at the tailpipe) cars are seen as critical in meeting those targets.

The E.U. demanded average vehicle fleet fuel consumption of 43 miles per U.S. gallon by 2015, and this has largely been met. Requirements will tighten severely by 2021 to 57.4 miles per U.S. gallon. The U.S. requires a slightly less aggressive 54.5 mpg by 2025.

In a report last December, PA Consulting said BMW and Volkswagen are most at risk from incurring massive fines of up $1 billion each for possibly flouting E.U rules on fuel economy. Other manufacturers exposed to big fines include Jaguar Land Rover and Hyundai of Korea and its Kia affiliate. All automotive manufacturers operating in Europe will have to sharply raise the amount of electric and plug-in hybrid vehicles in their fleets.

“We calculate that to meet the targets, BMW, Audi and Volkswagen will need 25 per cent of their European registrations (sales) to be of cars with alternative engines in 2021,” PA consulting said.

Without this government subsidy, it is likely manufacturers would have needed to finance a similar scheme on their own, given the public reluctance to buy electric cars, currently seen as costing about twice as much as they should, with a need for double the range.

Source: Forbes

Date: May 2016

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