German ministry proposes 5 billion euro car bonus scheme: sources

FRANKFURT (Reuters) - Germany’s Ministry of Economics has proposed a 5 billion euro ($5.6 billion) buyer bonus scheme as part of an impending stimulus package in an effort to boost car sales, two people close to the matter said on Sunday.

FILE PHOTO: German Economy Minister Peter Altmaier speaks at the "70 Years of Social Market Economy" anniversary event at the Federal Ministry for Economic Affairs and Energy in Berlin, Germany, June 15, 2018. REUTERS/Michele Tantussi

Global car sales have slumped as production lines and showrooms shut in response to the coronavirus pandemic. A business sentiment survey by the Ifo institute this month showed the German auto sector at its lowest ebb since 1991.

The heads of the co-governing Social Democrats (SPD) and Angela Merkel’s Christian Democrats (CDU) are expected to present the overall stimulus package on Tuesday, which could total up to 80 billion euros, according to one media report.

The economy ministry’s proposal is for purchase premiums to be paid to buyers of electric vehicles and conventionally powered cars worth less than 77,350 euros each, with the scheme expiring at the end of the year, the sources said.

The ministry declined to comment.

The proposal still has significant hurdles to clear.

SPD head Norbert Walter-Borjans told Reuters that he was in favour of supporting the auto industry but that incentivising purchases of conventional combustion engines was the wrong path.

“If the state subsidises (new cars), then that must go along with a change toward alternative engines. If discounts, then that must be for electric cars”, Walter-Borjans said.

The economy ministry’s plans foresee a basic premium of 2,500 euros per car, which would be topped up by 500 euros for fuel-efficient vehicles. Existing incentive programmes would be increased by 1,500 euros for electric cars and 750 euros for hybrids.

A slew of policymakers and industry groups have spoken out against premiums for car purchases, arguing that the stimulus programme should adhere to climate-change policies and not favour a single industry.

Reporting by Markus Wacket and Holger Hansen; Writing by Arno Schuetze; Editing by David Goodman and Peter Cooney