Germany’s incoming coalition government has pledged to support the country’s automotive industry with new purchase incentives for electric vehicles and is considering converting surplus car plants for defence production, according to a coalition agreement document seen by Reuters.
The agreement, reached between Germany’s conservative and Social Democratic parties, outlines a dual approach to industrial policy: accelerating the transition to electric mobility while also adapting industrial capacity to meet growing defence needs in Europe.
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The coalition plans to offer financial incentives for electric vehicles, including plug-in hybrids and battery electric vehicles with range extenders. Company cars would also benefit from tax breaks, including an exemption from vehicle tax for electric vehicles that would remain in place until 2035.
In a shift driven by geopolitical considerations, the government will explore options for converting and upgrading surplus automotive manufacturing facilities to be used by the defence sector. “The defence industry needs to grow very quickly and in a scalable manner,” the document stated, citing increased demand for military equipment and limited U.S. support.
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The agreement also includes a commitment to actively avoid EU emissions fines, highlighting concerns among carmakers that such penalties could hinder their electrification efforts. In the past, the European Union—backed by Germany—relaxed emissions targets after automakers warned of the financial impact of non-compliance.
The government said it would support infrastructure development for hydrogen-powered commercial vehicles, though specific measures were not detailed.
Source: Reuters