Petrol price surcharge, scrappage premium – Germany debates options to boost EV sales

Germany is debating a range of ideas to boost sales of electric vehicles (EV) and support the transition of one of the country’s most important industries. The automotive industry is facing ongoing difficulties, partly caused by lower-than-expected sales of EVs. Among the suggestions put forward to reverse the sales slump was Daimler manager Martin Daum's call for a surcharge of 10 cents per litre of petrol to incentivise a shift to electrically powered cars. “If we go ahead and say that 10 cents per litre of petrol will be added every 1 January, from now until eternity, this will remain within the regular oscillations of the fuel price within the first three or four years” and lead to the desired effects in a relatively short time, Daum said in an interview with public broadcaster SWR.

“At some point, this will bite you so much that you’ll never think of buying a combustion engine car again and directly go for an EV instead,” the manager argued. Daum said raising the price of fuel would be a very simple way of reducing carbon emissions - but claimed no policymaker dared to suggest it “because a majority of citizens probably will not accept it”. He added that a new buyer’s premium is not currently a solution to the problem. “This only makes sense in the very early stages, when it’s about testing new technologic ideas and customers run a risk and don’t know if it will work,” he said. EVs clearly had left this stage, Daum added.

Meanwhile, an analysis by research organisation International Council on Clean Transportation (ICCT) found that introducing a “voluntary scrappage scheme” (Abwrackprämie) for old combustion engine cars could help spur EV sales and slash emissions. Paying car owners a subsidy when switching engines would be a cost-effective option that also maximises societal health benefits through reduced air pollution, the ICCT said. The analysis focused on a scrappage scheme for diesel cars that are between 15 and 25 years old and for which owners should receive 80 percent of the car’s residual value.

The scheme would make the clean-up of Germany’s vast combustion engine car fleet much cheaper than using e-fuels: “E-fuel production costs are price prohibitive and importing them from other regions outside of Germany would, even in 2030, likely be up to three times more expensive than a voluntary scrappage scheme,” said ICCT Europe director Peter Mock. “Relying on e-fuels also moves us away from our goal of reducing air pollution and safeguarding public health,” he added.

Chancellor Olaf Scholz’s Social Democrats (SPD) recently proposed a scrappage premium for old combustion engine cars when swapping it for an EV, news agency dpa reported in September. The proposal was swiftly rejected by one of the SPD’s coalition partners, the pro-business Free Democrats (FDP), arguing this would entail too much bureaucracy and favour one technology over the other.

Germany’s auto industry is struggling with high investment costs and low demand for electric cars. The shift to electric mobility is shaking up longstanding industry networks and production practices centred on combustion engines. Challenges are exacerbated by German carmakers’ late decision to significantly ramp up their investments in EVs and battery technology, where they face fierce international competition and lag behind in key fields.