German Auto Industry Aid Too Weak And Will Require Top-Up.
The plan isn’t perfect but it should be a wake-up call ahead of the EU’s €750 billion recovery and resilience fund”
Germany’s financial incentives to rescue its coronavirus-damaged auto manufacturers is too weak and will have to be topped up again before the end of the year, according to a report from Fitch Solutions Country Risk & Industry Research.
Most of the incentives were aimed at electric cars, but they make up a very small segment of the market and production can’t easily be raised. Big auto makers like Volkswagen, BMW and Daimler’ Mercedes-Benz have large stocks of high priced, high profit margin sports cars and SUVs. They were hoping the scheme would give them some help selling them.
The package was greeted with enthusiasm by green groups like Brussels-based Transport and Environment.
“After France, now Germany is pointing the way forward with massive investments in electric cars, recharging infrastructure and railways. This is exactly what’s needed to support jobs and help us emerge stronger and greener from the COVID-19 crisis. The plan isn’t perfect but it should be a wake-up call for the (European Union) Commission and other European countries ahead of the all-important decision on the EU’s €750 billion ($850 billion) recovery and resilience fund,” said Stef Cornelis, T&E Germany director.
The measures were part of the German government’s 130 billion euro ($150 billion) stimulus package designed to pull the country out of the coronavirus-induced economic slump. The package included general sales tax cuts and money for local governments, and child allowances.
The buying incentives for electric cars were raised to an effective 9,000 euros ($10,000), but with a price ceiling of 40,000 euros ($45,000). This will exclude most Tesla Model 3s, the Model S and Model X. Pricey electric vehicles like the Audi e-Tron, Mercedes EQC and Jaguar I-Pace won’t benefit either. Electric vehicles likely to get a sales boost will include the Kia e-Niro, Hyundai Kona, Peugeot e208, the Honda e, and cheaper versions of the Volkswagen ID.3 which goes on sale in August.
No money for gas-guzzlers
Diesel and gasoline powered cars not able to achieve just over 41 miles per U.S. gallon, will not be eligible for a cut in sales tax to 16% from 19%. From January 2021, gas guzzling sports cars and SUVs will gradually be taxed at a higher rate.
The government rejected an auto industry request to incentivize vehicles with internal combustion engines (ICE) in favor of a plan to increase the electric car charging infrastructure.
Investment researcher Evercore ISI said the incentives might be good for the climate, but were disappointing for auto stocks.
“There had been hopes for up to a €2,500 grant for all ICE cars,” Evercore ISI analyst Chris McNally said.
Fitch Solutions said the plan was not strong enough.
“While the new incentives will support the EV market in the second half of 2020, we believe that automakers will require additional incentives not only to meet the European CO2 standards but also to recover from the negative financial impact caused by the Covid-19 pandemic,” Fitch Solutions said in the report.
“Furthermore, the European Commission also plans to provide incentives for environmentally friendly vehicle purchases for EU markets and is currently in discussion over conditions with national automakers and governments, which will offer additional upside risk for the wider region’s EV market. However, it is still to be seen how the EU wide incentives will be applied to countries which have their own incentives in place,” Fitch Solutions said.
Germany is Europe’s largest market for cars and SUVs. It accounts for about one quarter of the sales in Western Europe, which last year hit 14.3 million.
France has also introduced an 8 billion euro ($9 billion) plan to boost its auto industry including incentives for electric cars of up to 12,000 euros ($14,000).
Britain is expected to follow suit, but so far no details have emerged about the shape and extent of the plan. According to Monday’s Daily Telegraph, Britain wants to offer drivers who swap diesel or gasoline cars for an electric one, a subsidy of 6,000 pounds ($7,620). The plan is expected to be announced July 6