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Germany’s Social Democrats Weigh EV Subsidies in 2025 Strategy

(Bloomberg)

(Bloomberg) -- Germany’s Social Democrats, the party of Chancellor Olaf Scholz, is considering fresh subsidies on electric vehicles as a cornerstone of its economic policy ahead of elections next year.

The center-left SPD wants to boost EV sales by re-introducing a purchase premium for battery-powered cars, providing tax rebates for electric corporate cars, and putting EV quotas in place for leasing providers, according to a strategy document the party plans to adopt on Sunday that was viewed by Bloomberg.

The proposal comes as Germany’s auto industry struggles to adapt to the shift to EVs, amid intensifying competition from less expensive Chinese brands like BYD Co. as well as weaker demand.

Volkswagen’s deliveries of battery-powered cars fell 12% in Europe last quarter, extending a downturn this year after Germany and other EU countries removed state subsidies for buying EVs, which still tend to cost more than their combustion-engine equivalents.

Germany’s carmakers are also grappling with weaker sales in China, where a protracted real estate crisis has cut into luxury spending and domestic EV producers have gained the upper hand. BMW AG and Mercedes-Benz Group AG recently warned that the slowdown in China will hit profits this year.

The SPD will also advocate special tax incentives for companies with a “Made in Germany” agenda, as well as tax cuts for large parts of the middle class, according to the document. The party wants to link tax bonuses to investments in growth industries and those that safeguard jobs within the country. 

“Anyone who invests in Germany will receive tax breaks,” according to the document. 

The SPD is looking to cut income taxes for about 95% of taxpayers, and instead “make the top 1% of incomes slightly more responsible” in shouldering the tax burden. 

The plan contrasts with recent comments by Friedrich Merz, the chancellor candidate for the center-right Christian Democrats, who called for more respect for high earners. 

©2024 Bloomberg L.P.