Germany plans to increase a climate protection surcharge on motor vehicle tax for new cars from 2021 so owners of ‘gas guzzlers’ such as large SUVs will have to pay much more taxes, a draft law reportedly showed this week.
Reuters reported the new regulation, drafted by the finance ministry, meant the surcharge would double for buyers of new cars with carbon dioxide emissions of more than 195g/km.
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Buyers of smaller cars with CO2 below 95 grams would not face any additional surcharge while electric cars would be exempt completely from any motor vehicle tax until the end of 2030, according to the draft law which was set to be discussed internally among ministries.
Other EU countries, including the UK which is leaving the bloc, already operate similar CO2-based vehicle taxation laws. Vehicles sold new in the UK are subject to initial payments on registration and annual charges which are set according to official CO2 emissions data.
The move came after top German auto industry executives last month made their case to the chancellor for a new scrappage (‘cash for clunkers’) programme needed to get Europe’s largest economy moving again.
Fortune reported Angela Merkel hosted a video conference in May with top officials from domestic automakers including Volkswagen, BMW and Daimler to consider proposals to revive car sales.
The report noted VW group CEO Herbert Diess and others had made public appeals for government incentives to purchase new cars, saying it would help suppliers and dealers, as well as automakers, recover from the coronavirus crisis.
Fortune said premiers of the states of Bavaria, Baden-Wuerttemberg and Lower Saxony – homes to BMW, Daimler and VW, respectively – were supporting a plan to pay a subsidy of EUR4,000 (US$4,400) for low-emission cars as well as an EUR1,000 scrapping incentive, according to a tweet from Bavarian state leader Markus Soeder, a leading contender to succeed Merkel after her term expires.
Reviving auto demand would be “one of the key questions for the comeback of the German economy”, Lower Saxony premier Stephan Weil was quoted as saying in an interview with Manager Magazin by Fortune, calling for more aid for electric cars than diesel vehicles.
“Without sales incentives, many people will initially have other things on their minds than buying new cars and other goods.”
Merkel’s administration had cooled expectations as it considered a broader stimulus package with finance minister Olaf Scholz saying the administration needed several weeks to maker a decision.
Some carmakers had echoed Soeder’s demands aid should be linked to a car’s ability to emit low levels of carbon dioxide, with the most generous incentives reserved for buyers of electric cars, according to Fortune.
Kia Motors European (Frankfurt based) chief operating officer last month said he would support a CO2-based programme though he preferred one which covered all new cars.
However, according to the Financial Times, the much anticipated virtual conference between the chancellor, her top ministers, and the Volkswagen, Daimler and BMW chiefs last month ended without resolution.
Merkel’s administration would commit only to further meetings to “discuss measures to stimulate the economy” with a possible announcement then hinted at for in early June, and the car executives were quick to express their dismay to the FT.
Early June has passed and, so far, the German government and automakers remain somewhat apart with any scrappage scheme still in limbo.
A similar proposal appears to have died an early death here in the UK. Several weeks ago, there was talk prime minister Boris Johnson’s government would offer a GNP6,000 incentive towards the purchase of battery electric cars.
UK auto workers union Unite immediately claimed a car scrappage scheme on its own would fail to protect domestic jobs or carmakers. Proposals to introduce a scrappage scheme to help address climate change would, without additional measures to support infrastructure and the UK manufacture of electric vehicles, fail to provide a boost to the UK’s car industry, the union insisted.
Most recent reports suggest the government is now reconsidering its plan.
