Potential multi-billion subsidies for clean cars

21 May 2020

21 May 2020

The European Commission is reportedly drawing up a €100 billion economic and climate protection package for the transport industry. An internal draft document from the Commission reveals that this package could include €20 billion for cleaner cars, the German newspaper Sueddeutsche Zeitung reported.

The draft outlines that this money would be channelled into purchase premiums over the next two years. The Commission hopes this will help reduce pollution in line with European standards, with the funds themselves likely to come from two pre-existing EU programmes, not directly from the reconstruction packages currently under discussion.

Defining a ‘clean car’

The specifics of these subsidies are still being worked out, however. There are reportedly conflicting ideas about how to define a ‘clean car’, not only inside the Commission but within federal governments themselves.

According to Sueddeutsche Zeitung, German Federal Transport Minister Andreas Scheuer has advocated that vehicles with CO2 emissions of 140g/km should also be subsidised. This would mean a purchase premium would be available on models like the 148-horse-power VW Tiguan. Should this plan occur, it would likely impact the 95-gram average Europe’s fleets are expected to meet by 2021.

Stef Cornelis from lobby group Transport and Environment told the German newspaper that such a move would be ‘completely unacceptable.’ Stefan Heimlich, head of the European motorists club ACE, also warned that it would be wrong to promote cars that do not comply with the 95g/km limit.

The need for ‘win-win’ solutions in the industry’s COVID-19 recovery plan was highlighted recently when automotive associations and key industry heads called for coordinated national fleet-renewal schemes. Environmental, industrial and societal needs all had to be addressed, Sigrid de Vries, CLEPA secretary-general said. This would mean recovery measures could restart the industry and employ a range of available technological solutions needed for carbon-neutrality.

Addressing the European Parliament this month, European Commission President Ursula von der Leyen also highlighted the need to focus on carbon-friendly stimulus measures. ‘If it is necessary to increase our debt, which our children will then inherit, then at the very least, we must use that money to invest in their future, by addressing climate change, reducing the climate impact and not adding to it,’ she said.

Investment fund

However, incentive schemes are not the only method via which the industry could see a greener recovery. The €20 billion purchase incentives would only make up one part of a larger stimulus plan, according to Sueddeutsche Zeitung. Between €40 billion and €60 billion could go towards accelerating the development of alternative drivetrains, all pooled via an investment fund.

The Commission also reportedly wants to double its support for the expansion of electromobility, to lower road-transport emissions. This accompanies the goal of establishing two million public charging points for electric cars and alternative drives by 2025.

Continued investment in green automotive technology and infrastructure could be well received as the share of electrically-chargeable vehicles in the EU grew to 6.8% in Q1 2020. As the pandemic may have a smaller impact on buyers who could afford the comparatively higher cost of an electric vehicle, continuing to fund electric automotive technology makes sense. As the new car market shrinks, this could leave the greener vehicles with an even larger market share.

As governmental bodies decide how best to help the hard-hit automotive industry with purchase incentives, potential scrappage schemes and long-term investment, they will also need to take stock of how this plays out with the public. A recent ARD Deutschlandtrend survey found that 63% of respondents were against government-backed incentives when buying a car. A further 22% believed that any scheme should only be for low and zero-carbon vehicles.