Germany Plans to Introduce €3 Billion Electric Vehicle Incentive Measures

According to Bloomberg, the governing coalition led by German Chancellor Friedrich Merz has reached an agreement to launch a total of 3 billion euros (approximately 3.5 billion USD) in new purchase incentives for zero-emission vehicles by 2029. This move is one of the broader measures taken by the Merz government to support the country's struggling car manufacturers.

Image source: Volkswagen

After talks with coalition partner SPD in Berlin, Merz announced this measure aimed primarily at low- and middle-income families. Merz is set to meet later on the evening of October 9 with executives from the automotive industry and labor representatives to discuss the future development of the automotive sector. As a key industry in Europe's largest economy, the German automotive industry is currently facing multiple challenges: on one hand, competition pressure from China continues to rise, while on the other hand, the uncertainty of U.S. tariff policies is constantly bringing about changes.

Merz and Germany's Vice Chancellor and Finance Minister, as well as co-chairman of the Social Democratic Party, Lars Klingbeil, jointly stated: "We are in agreement that the German federal government will do everything within its responsibility framework to ensure a bright future for the German automotive industry."

It is reported that after the automotive industry summit held on October 9, the German ruling coalition is expected to call on the EU to provide greater flexibility for car manufacturers to achieve fleet carbon emission targets. In addition, the German government confirmed this week that it will extend tax incentives for new electric vehicles until 2035.

However, Merz still needs to persuade other EU member states to recognize Germany's position on the ban on fuel vehicles, urging the EU to relax the ban on new fuel vehicles by 2035. According to informed sources, the European Commission is currently re-evaluating the carbon emission limits for the automotive industry and plans to introduce a set of support policies for car manufacturers by the end of this year.

One informant stated that the plan may include providing additional flexibility for automakers to achieve the 55% reduction target by 2030—potentially by introducing a multi-year average calculation system for carbon emissions, similar to the adjustments made by the EU for its 2025 carbon emissions targets earlier this year. However, the informant pointed out that the EU is still unwilling to abandon the target of allowing only the sale of zero-emission passenger cars and vans after 2035.

Additionally, the European Commission has committed to establishing an exemption clause for "e-fuel." This type of fuel is produced by capturing carbon dioxide and using renewable energy, and it can be used to power new fuel vehicles, plug-in hybrid vehicles, and range-extended vehicles.