Germany increases financial support for its automotive industry

20 November 2020

20 November 2020

Germany’s government has agreed a €4 billion stimulus package for the country’s automotive industry as it looks to battle the challenges of coronavirus (COVID-19) recovery and a transition to electrically-chargeable vehicles (EVs).

Like most European markets, Germany’s automotive sector has been hit hard by the COVID-19 pandemic. The country is home to some of the continent’s biggest brands and manufactured 4.7 million passenger cars in 2019. At the start of this year, production was halted, and sales slowed, although not as dramatically as in other markets, as the infection rate grew.

The country’s government is also looking to use the pandemic as an opportunity to reset to a greener economy and is pushing the adoption of EVs. However, in order to meet expected demand, carmakers will have to invest large amounts in switching production lines for building new electric powertrains, while also financing the development of batteries and other associated new requirements.

Asking manufacturers and suppliers to do this when sales are struggling at home and abroad, and therefore full-year profits are likely to be lower than expected at the start of 2020, is almost impossible. Converting drivers to more expensive technology under the current economic pressures is additionally challenging. Therefore, the government has agreed on a stimulus package that will see funding in a number of areas, all of which it hopes will support the industry out of the economic turmoil created by COVID-19 and on the road to a greener future.

Supply chain help

A total of €2 billion will be made available from existing stimulus funds to help suppliers adapt production lines for EV products. This is aimed at helping small and medium-sized enterprises (SMEs), which are likely to be struggling more with the amount of investment required at this time. Innovation clusters are also to be established, allowing companies to bundle their resources and exchange knowledge and experience, as well as establishing shared laboratories for testing.

Of this amount, €95 million will be used to develop new training associations and regional ‘qualification clusters’ to strengthen professional development for companies and their employees, which will benefit the numbers of skilled workers in regions.

‘The change in the industry must be driven along the entire value chain. We have to support our employees in new, changed jobs with qualifications and further training. Small and medium-sized supplier companies, in particular, must be accompanied during the transformation,’ the government stated.

In addition to these funds, €1 billion is being put towards further incentives for battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs). The bonus scheme will now run until the end of 2025, with PHEVs only funded if they have a minimum range of 60km on electric power from 2022, and at least 80km from the start of 2025.

Finally, a further €1 billion will be spent to help technological developments, as part of a ‘future fund’ for the automotive industry.

Infrastructure challenge

The German government is looking to improve the country’s charging infrastructure as it promotes EV uptake. With the European Green Deal also looking to reduce the numbers of internal combustion engine (ICE) vehicle sales, ministers recognise that more needs to be done with the publically-accessible charging infrastructure and has drawn up plans to address current shortfalls.

‘The expansion of the infrastructure will not be based on what we need in terms of charging infrastructure today, but on the future demand that an electric transport sector will generate,’ the government stated.

A statutory regulation for a uniform payment system at charging stations will be coordinated with the government and implemented as soon as possible. It is also expected that charging-point companies will contribute to the expansion of the network, including the deployment of fast-chargers, with at least 150kw, at fuel stations across the country.

The aim is to equip at least 25% of fuel stations with fast-charge points by the end of 2022, with 50% equipped by 2024 and 75% by 2026. Oil companies that operate these sites are also expected to contribute funding to the rollout.

The ambition is that Germany will have 50,000 additional charging points by the end of next year, meaning a total of 72,000 publically-accessible locations.