German ministry proposes €5 billion car bonus scheme, say sources

By REUTERS | 1 June 2020

Heavy traffic in central Berlin. Germany is expected to present a stimulus package on Tuesday, which could total up to €80 billion (RM384bil). — AFP

FRANKFURT: Germany’s Ministry of Economics has proposed a €5 billion (RM24bil) buyer bonus scheme as part of an impending stimulus package in an effort to boost car sales, two people close to the matter said on Sunday.

Global car sales have slumped as production lines and showrooms shut in response to the coronavirus pandemic. A business sentiment survey by the Ifo institute this month showed the German auto sector at its lowest ebb since 1991.

The heads of the co-governing Social Democrats (SPD) and Angela Merkel’s Christian Democrats (CDU) are expected to present the overall stimulus package on Tuesday, which could total up to €80 billion (RM384bil), according to one media report.

The economy ministry’s proposal is for purchase premiums to be paid to buyers of electric vehicles and conventionally powered cars worth less than €77,350 (RM372,000) each, with the scheme expiring at the end of the year, the sources said.

The ministry declined to comment.

The proposal still has significant hurdles to clear.

SPD head Norbert Walter-Borjans said he was in favour of supporting the auto industry but that incentivising purchases of conventional combustion engines was the wrong path.

“If the state subsidises (new cars), then that must go along with a change towards alternative engines. If discounts, then that must be for electric cars”, Walter-Borjans said.

The economy ministry’s plans foresee a basic premium of €2,500 (RM12,013) per car, which would be topped up by €500 (RM2,403) for fuel-efficient vehicles. Existing incentive programmes would be increased by €1,500 (RM7,208) for electric cars and €750 (RM3,604) for hybrids.

A slew of policymakers and industry groups have spoken out against premiums for car purchases, arguing that the stimulus programme should adhere to climate-change policies and not favour a single industry.