Germany’s Federal Ministry for Economic Affairs and Climate Action publishes package of measures to renew and strengthen the car industry

On 12 December 2024, the Federal Ministry for Economic Affairs and Climate Protection (the Ministry) presented a package of measures intended to boost the competitiveness of the German and European car industries, particularly in relation to their American and Chinese competitors.

A. General measures planned

The Ministry recognises the significant competitive pressure on the German and European car industry. The published ”car package” therefore contains a raft of political measures to support the industry and make it more competitive.

In principle, the path taken by the car industry will not change. The Ministry is convinced that clarity and planning security are crucial for industry and consumers. The phase-out of the internal combustion engine in passenger cars from 2035 will be upheld, as will the agreed fleet limits. To tackle the current sales problems, the penalties for non-compliance with the fleet limits are to be retained, but made more flexible so that infringements in 2025 can be offset against over-fulfilment in 2026 and 2027. In addition, the Ministry intends to use the fines specifically to support the European car industry and not to let them flow into the EU budget in general.

The weakness of Germany and Europe as a business location is to be counteracted by changes to energy prices, taxation and excessive red tape. The Ministry refers to the federal government’s growth initiative and its own proposed modernisation agenda which provides for an investment bonus, a reduction in electricity tax and a halving of grid fees. In addition, further efforts to cut red tape are planned, with the Ministry focusing in particular on regulation from Brussels. In particular, transformation networks are to be further promoted specifically for the car industry.

The Ministry also wishes to take a closer look at the innovative power of the European and German car industry, with a particular focus on car digitalisation, automated driving and innovation in robotics and materials. While seeing the carmakers themselves as the ones primarily responsible, the Ministry wants to intervene by taking supportive action. It refers to the proposals of the expert group on the transformation of the car industry. In addition, the Ministry intends to further promote battery research.

B. Targeted support for electric mobility

The car package contains specific measures for electric mobility.

Firstly, the Ministry wants to make it easier and cheaper to charge electric cars. Government funding to expand the charging infrastructure for electric vehicles will continue. To further advance and accelerate this expansion, the Ministry also thinks further regulatory measures are needed. The next proposal is to use the AFIR (Alternative Fuels Infrastructure Regulation) to create a wider range of services and more price transparency, as well as a pan-European regulation for e-roaming. Further measures concern efficiency and cost benefits in connection with electromobility and renewable energy. Obliging electricity providers to offer dynamic electricity tariffs from 2025 will enable the electricity grid to be digitalised and make it easier for drivers to charge their own electric car at times when electricity prices are lower. The next step will be bidirectional charging, meaning that the car can be used as an electricity storage device at the same time. Finally, electricity is set to become cheaper through a reduction in the electricity tax to the European minimum level and by halving grid fees through partial state financing.

Secondly, the Ministry aims to further strengthen the commercial market, as this is the market that is considered crucial in order to boost electric mobility. To this end, the federal government has decided to allow special depreciation for electric vehicles. In addition, commercial lessees will be able to claim the leasing instalments paid as tax deductible in advance and thus reduce their profits. The package also envisages reforming the company car tax privilege so that it provides more incentives for climate-neutral mobility. Finally, the public sector is to make increasing use of electric mobility and serve as a role model.

Thirdly, the Ministry sees problems in the financing of electric cars for people with low and middle incomes and would like to set up targeted state funding in this area; funding should only be given to companies that also manufacture in Europe (“In Europe, for Europe”).

To enable people on lower incomes to afford electric mobility, the Ministry proposes that the state should provide a charging credit of €1,000 for buyers of electric cars, whether new or used. In addition, tax incentives in the form of a depreciation option, similar to the incentives for energy-efficient building renovation, are being considered. Since low-income households hardly benefit from tax incentives anyway, alternative models such as a social leasing model are also to be introduced. Finally, the Ministry also wishes to stimulate the used car market for electric cars by offering a benefit of €100 for each professional battery check.

C. Conclusion

The proposed package of measures comes in response to the pressure currently facing the German and European car industry. It contains a variety of measures of varying degrees of specificity to support it. Some of the proposed measures require changes in European Union secondary legislation. Whether these measures are enough and, above all, whether they will be implemented in the next legislative period, is unclear given the current political situation in Germany. However, this comprehensive and ambitious package once again underlines the prime importance of the car industry for the German and European economy.