Automotive News Europe — 2025-10-06
Automotive Industry
Germany’s ruling coalition will extend an exemption from vehicle tax for new full-electric models as part of a broader effort to support the nation’s key car industry in the transition to more climate-friendly technologies.
Finance Minister Lars Klingbeil will present a draft law soon which will keep the existing tax exemption for EVs in place until 2035, Maximilian Kall, a finance ministry spokesman, said on Oct. 6 at a government news conference in Berlin.
“To get significantly more electric cars on the road in the coming years, we need to set the right incentives now,” Klingbeil, a Social Democrat who is also the vice chancellor, told the dpa news agency.
Sales of battery electric vehicles rose by 32 percent to 45,495 in Germany in September, according to the road traffic agency KBA.
The tax exemption on EVs was due to end on Jan. 1, 2026. Extending the exemption is expected to cost the federal government approximately €600 million ($703 million) in lost revenue through 2029.
The extension comes ahead of a “car summit” on Oct. 9 between government officials, auto executives and labor representatives.
The meeting will focus on ways to help the car industry navigate mounting challenges ranging from Chinese competition to U.S. trade tariffs and stubbornly high energy costs.
Announcements last month that Volkswagen was cutting production and Robert Bosch was slashing 13,000 jobs were the latest evidence of how the auto industry’s decline is rippling through Europe’s biggest economy.
ZF Friedrichshafen last week said it planned to eliminate 7,600 positions at its electrified drivetrain division as it steps up its restructuring efforts to deal with poor demand.
“We now need a strong package to guide Germany’s automotive industry into the future and secure jobs,” DPA quoted Klingbeil as saying. “We want the best cars to continue to be made in Germany.”
Germany’s coalition split over 2035 ICE ban
The Oct. 9 meeting is also likely to discuss the European Union’s 2035 deadline to effectively ban combustion engines by allowing only new cars with zero emissions to be sold.
Germany’s coalition of Chancellor Friedrich Merz’s conservatives and Klingbeil’s Social Democratic Party are split on the ban.
As part of his government’s effort to aid the car sector, Merz last month urged the EU to give up the 2035 deadline and instead allow the industry to pursue a softer path to climate neutrality.
Some members of Klingbeil’s SPD, including Environment Minister Carsten Schneider, are unhappy with the move, but the party is expected to signal its backing later this week.
“We haven’t agreed on a joint position on the matter within the coalition but I hope that this will happen soon,” Merz said in a television interview with n-tv broadcaster. “I don’t want Germany to be among the member states that stick to this wrong ban.”
Olaf Lies, the SPD premier of the state of Lower Saxony whose government is VW’s second-biggest shareholder, said last week the priority should be to protect jobs.
“The goal of selling only pure electric cars by 2035 is not realistic,” Lies told German newspaper NWZ. “Combustion engines, especially plug-in hybrids and vehicles with range extenders, must continue to be permitted beyond 2035, and alternative fuels must also be included.”