German Carmakers Get EV Tax Boost Before Summit With Merz

(Bloomberg) -- Germany’s ruling coalition confirmed it will extend a tax exemption for new electric vehicles as part of a broader effort to support the nation’s key car industry in the transition to more climate-friendly technologies.

Finance Minister Lars Klingbeil will present a draft law soon which will keep the existing tax exemption for EVs in place until 2035, Maximilian Kall, a finance ministry spokesman, said Monday at a regular government news conference in Berlin, confirming a report by DPA.

“To get significantly more electric cars on the road in the coming years, we need to set the right incentives now,” Klingbeil, a Social Democrat who is also the vice chancellor, told the news agency.

The coalition accord agreed on by Chancellor Friedrich Merz’s conservatives and Klingbeil’s SPD included the pledge to extend the incentive to 2035 and the confirmation comes ahead of a planned “car summit” Thursday between government officials, auto executives and labor representatives.

The meeting hosted by Merz at the chancellery will focus on ways to help the car industry navigate mounting challenges ranging from Chinese competition to US trade tariffs and stubbornly high energy costs.

Announcements last month that Volkswagen AG was paring back production and Robert Bosch GmbH slashing 13,000 jobs were the latest evidence of how the auto industry’s decline is rippling through Europe’s biggest economy.

Car-parts maker ZF Friedrichshafen AG followed last week by saying it planned to eliminate 7,600 positions at its electrified drivetrain division as it steps up its restructuring efforts to deal with poor demand.

“We now need a strong package to guide Germany’s automotive industry into the future and secure jobs,” DPA quoted Klingbeil as saying. “We want the best cars to continue to be made in Germany.”

Extending the EV exemption is expected to cost the federal government approximately €600 million in lost revenue through 2029, Kall told reporters.

As part of his government’s effort to aid the car sector, Merz last month urged the European Union to give up its 2035 deadline to effectively ban combustion engines and instead allow the industry to pursue a softer path to climate neutrality.

Some members of Klingbeil’s SPD are unhappy with the move, but the party is expected to signal its backing this week, with the issue set to be discussed at regular coalition talks on Wednesday in Berlin.

Olaf Lies, the SPD premier of the state of Lower Saxony whose government is VW’s second-biggest shareholder, said last week the priority should be to protect jobs.

“The goal of selling only pure electric cars by 2035 is not realistic,” Lies told German newspaper NWZ. “Combustion engines, especially plug-in hybrids and vehicles with range extenders, must continue to be permitted beyond 2035, and alternative fuels must also be included.”

--With assistance from Chris Reiter.

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