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Germany boosts electric-car incentives to stimulate demand

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Workers at the Volkswagen (VW) ID.3 electric car assembly line at the carmaker's factory in Zwickau, Germany. Because of higher costs for development and batteries, the price of an electric car remains well above the level for a comparable combustion-powered model.

Berlin

CHANCELLOR Angela Merkel's government and Germany's carmakers agreed to increase cash incentives for electric cars as they attempt to accelerate the transition away from the combustion engine and reduce harmful emissions.

A so-called "Environment Bonus" will be raised by half to as much as 6,000 euros (S$9,065) per electric vehicle and the car industry will continue to cover half the cost, Mrs Merkel's chief spokesman, Steffen Seibert, said in a statement in Berlin. The changes will take effect this month and run through 2025, according to Bernhard Mattes, president of Germany's VDA auto lobby.

"It will therefore be possible to provide support for another 650,000 to 700,000 electric vehicles," Mr Seibert said. The measures were agreed at Monday evening's meeting in Berlin between Mrs Merkel and officials from carmakers, parts suppliers and labour unions, including the chief executives of Volkswagen AG, BMW AG and Daimler AG.

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The accord came a day after Mrs Merkel visited a revamped VW electric-car plant in Zwickau, eastern Germany. The chancellor has come under fire for failing to make more progress in curbing greenhouse-gas emissions, while VW - the world's biggest carmaker - is attempting to manage the costly shift to electric vehicles without running itself into the ground.

Mrs Merkel called the challenges facing the industry "a paradigm shift in mobility that has never been realised in automotive history".

It remains unclear, however, how many German customers will switch to electric cars in a country with a rich automotive heritage centred on combustion engines.

Because of higher costs for development and batteries, the price of an electric car remains well above the level for a comparable combustion-powered model. VW's ID.3, for example, will start at just under 30,000 euros, while the least-expensive version of the new Golf with a traditional engine will be sold for less than 20,000 euros.

The government's push to promote electric cars includes boosting the number of public charging stations to 50,000 within two years, Mr Seibert said. Carmakers will help fund 15,000 of the stations by 2022.

"I see this as an absolute chance to now increase demand, which will be good for us," Klaus Rosenfeld, chief executive officer of German automotive supplier Schaeffler AG, said in an interview on Tuesday.

"Anything that helps to achieve this mobility transformation, to increase consumer demand, is good for us so in that sense we welcome the decision made today," he added.

Mrs Merkel said in a podcast on Sunday that the government's focus is on promoting electric vehicles, but that it's also open to hydrogen technology. It wants one million charging stations to be in place by 2030, she said.

Mrs Merkel's Climate Protection Programme 2030, unveiled in September, targets as many as 10 million electric cars on German roads by that year, a goal that most automotive experts say is unrealistic even with generous subsidies.

Ferdinand Dudenhoeffer, the director of the University of Duisburg-Essen's Center for Automotive Research, expects a tally of about five million all-electric and hybrid car registrations by 2030.

Given a starting point this year of about 420,000 of the vehicles in a national fleet of 47 million, that would be an achievement, he said in September. BLOOMBERG