Will paying German drivers a bonus for buying electric vehicles work?

Proposals by the German Social Democratic Party (SPD) to pay drivers thousands of euros to replace their polluting cars with EVs have been criticised for tackling the wrong problem.

Plans would see Germans willing to scrap their gas-guzzling cars and replace them with a new electric vehicle rewarded with a €6,000 bonus. Buying a used EV would result in a €3,000 payment.

The SPD, one of the key political groups in the German government, hopes the scrappage scheme will kick-start Germany’s stalling transition from the internal combustion engine to cleaner EVs and support the drive to meet climate targets.

The bonus is designed to smash through one of the major barriers holding consumers back from buying electric vehicles – the cost. Despite falling battery prices and a growing number of more affordable EV models on the market, the upfront price of an electric car remains a significant deterrent for many.

Financial incentives will not work

Opponents to the proposal, including the German Association of Energy and Water Industries (BDEW), argue that the SPD has targeted the wrong problem and is urging the government to prioritise the expansion of the charging infrastructure.

The association argues that without a significant increase in the number of charging stations, in both urban and rural areas, the adoption of EVs will be slow, regardless of financial incentives. For them, consumers’ fear of running out of charge – ‘range anxiety’ – is a more pressing concern than the price tag of an EV.

Green Party Bundestag member Michael Müller agrees: “We cannot push consumers into buying electric cars if they cannot find a place to charge them. The priority should be on building a robust and accessible network of charging stations, especially in rural areas,” he said.

Bonuses could stimulate economic and environmental activity

Supporters of the proposal argue that the scrappage bonus could provide a much-needed financial boost to the vitally important German automotive industry.

SPD General Secretary Kevin Kühnert believes the scheme has the potential to increase the affordability of small electric cars and strengthen Germany’s position as an international  automotive centre.

Volkswagen, BMW, and Mercedes-Benz have all committed to expanding their EV ranges in the coming years, and increased demand would support the domestic auto industry’s move away from combustion engines.

Jörg Hofmann, head of IG Metall, Germany’s largest industrial union, sees the bonus as a necessary step to drive demand for EVs and, crucially, protect jobs in the automotive industry. “This scrappage bonus is not just an environmental initiative; it’s an industrial policy to ensure that Germany remains competitive in the global automotive sector,” he said.

With transportation accounting for around 20% of Germany’s greenhouse gas emissions, encouraging a swifter and broader transition to electric vehicles would help the country reach its target of hitting its net-zero goal by 2045.

Martin Kaiser, executive director of Greenpeace Germany, highlighted the environmental benefits of the SPD plan and proposed a two-pronged approach to tackling the problem.

“Germany’s transport sector is still lagging behind in emissions reductions, and replacing old diesel and petrol cars with electric ones is essential to meet our climate commitments.”

Kaiser added that while charging infrastructure is vital, there’s no reason not to pursue both strategies simultaneously, adding: “We can and should be doing both — expanding the charging network and incentivising consumers to make the switch to electric vehicles.”

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A previous scrappage scheme that ran from January to September 2009, saw customers receive a €2,500 discount off a car up to 12 months old when they traded in a car more than nine years old.

The €5 billion scheme encouraged almost two million motorists to scrap their old cars and exchange them for a new one, and boosted car sales by 28%, compared with the same period the previous year.

The SPD scrappage bonus proposal is currently under discussion, with no confirmed date for its introduction.