OpinionAutomotive Summit

Bitter reality check for the German auto industry

There is a significant gap in the federal finances following the decision of Germanys highest court regarding the reallocation of Covid19-related budget to the Climate and Transformation Fund. After a reality check at the automotive summit, new ideas are needed on how to proceed with the promotion of electromobility.

Bitter reality check for the German auto industry

The groundbreaking decision of the highest German court on November 15 has rendered authorizations for credits exceeding 60 billion euros for the Climate and Transformation Fund (KTF) untenable. The consequences of the decision are severe and cause concerns far beyond the realm of politics. Significant investments in climate protection and other future projects are now in question. Especially in areas like electromobility, which are not currently profitable without government support, the specific impacts of the judgment cannot be estimated.

Even before the courts decision, it was evident that the German government's goal of having 15 million electric vehicles by 2030 would be significantly missed given the current ramp-up curve with existing programs and incentives. Forecasts from industry experts, with new registrations of 450,000 purely electric cars expected this year and 650,000 in 2025, suggest that by 2030, at most, 7 to 8 million electric cars will be on German roads. The implementation of a crucial political goal for emission reduction and decarbonization could be delayed, possibly by years.

The urgency of rapid progress in expanding electromobility is highlighted by additional figures: at the beginning of November, there were approximately 1.3 million pure electric cars registered out of a total of almost 50 million cars in Germany. It is unclear to what extent government incentives for boosting vehicle sales and creating the necessary infrastructure are now in jeopardy after the court ruling. The draft KTF economic plan for the next four years envisaged funding of 4.7 billion euros for the further development of electromobility, including charging infrastructure. The recent automotive summit at the Federal Chancellery did not provide ideas on where the money for these funding plans could now come from.

Instead, participants demonstrated unity in general statements, such as the need to reduce the purchase costs of electric cars. They welcomed measures to promote the establishment of semiconductor and battery production capacities and emphasized the importance of announced large and small investments in expanding industrial networks, as well as ensuring a reliable supply of raw materials and semiconductors. The expansion of charging infrastructure will be vigorously continued. Well, after this rather bitter reality check, German policymakers will quickly need to find ways to address these requirements budgetarily. A rather dfficult task.