Germany ends tax disadvantage for corporate electric cars

FRANKFURT, June 7 Fri Jun 7, 2013 11:46am EDT

FRANKFURT, June 7 (Reuters) - German legislators voted in tax incentives for drivers of zero-emission corporate cars on Friday, cheering an industry so far disappointed by the country's flagging electric car market.

Chancellor Angela Merkel wants 1 million electric cars on German roads by 2020 but fewer than 3,000 were sold last year, since her centre-right government refuses to directly subsidize their purchase.

The private use of a company car is treated as taxable income in Germany and measured at a flat monthly rate of 1 percent of the vehicle's gross list price. So electric cars have been at a disadvantage since their price tag can be as much as double that of a car using a conventional combustion engine.

According to the new law, backdated to Jan. 1, private users can offset the list price with 500 euros per unit of battery size, expressed in kilowatt hours. The maximum offset is 10,000 euros, which would equate to a powerful 20 kWh battery.

Automakers believe corporate customers, who make up roughly a third of demand in Germany, will be among the first to purchase a new electric vehicle.

"Finally a long overdue step is taken to make the use of electric cars more attractive for commercial customers," the head of Germany's import brands, VDIK President Volker Lange, said in a statement on Friday.

The VDIK expects the German car market to be roughly stable at around 3 million new vehicles this year.

The new law relates to both battery electric cars (BEVs), such as Nissan's Leaf, as well as plug-ins like the Opel Ampera, which additionally come equipped with a small combustion engine to extend the car's range.

The timing is good for Renault too, whose Zoe model - its first conceived as an electric car rather than a converted model - just hit showrooms.

For a person paying a 30 percent income tax rate and driving a corporate car employing a 20 kWh battery that cost 40,000 euros, the change translates to annual savings of 360 euros.

This effect diminishes over time, however, so the amount one can offset will sink annually by 50 euros per kilowatt hour.

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