The German government wants to boost sales of e-cars with tax breaks and will decide on this on Wednesday.

On the one hand, tax benefits for fully electric company cars are to be extended to cars worth up to 95,000 euros, according to the draft bill that the cabinet intends to approve on Wednesday. It was made available to Reuters on Tuesday. In future, owners of such luxury e-service cars up to this price will benefit from the reduced tax rate of 0.25. Previously, this lower monthly rate only applied up to cars costing 70,000 euros. In comparison: for petrol cars, for example, 1.0 percent of the non-cash benefit must be taxed each month.

The government also intends to introduce a special depreciation allowance for e-cars, which will apply retroactively from July until 2028. This means that 40 percent can be claimed for tax purposes in the year of purchase, 24 percent in the following year and 14 percent in the second year after that. After that, it is 9 percent, 7 percent and then 6 percent in the fifth following year. According to estimates by the Ministry of Finance, both instruments together will cost the state around 600 million euros over the next few years.

The government hopes that both instruments will improve sales of e-vehicles, which have been weakening recently. The plans were part of the so-called Growth Opportunities Act and were met with some harsh criticism. Environmental and social organizations had doubted that this would trigger a boost in sales. "The money will mainly benefit top earners," they said in a joint paper. There are better and fairer instruments to promote affordable and climate-friendly electric vehicles. Above all, there are still too many tax advantages for combustion company cars. On the other hand, the future of the nationwide Germany public transport ticket for 49 euros remains open. However, it already benefits twelve million people and connects the city and countryside in a climate-friendly way.

The German government had abolished the purchase premium of 6,000 euros at the end of 2023, which applied to all e-cars up to 65,000 euros. According to government calculations, the owner of an e-car costing 90,000 euros could save around 9,000 euros over three years if they switch from a combustion engine and have a tax rate of 40 percent. This would therefore be 50 percent more than the previous purchase premium of 6,000 euros if a top earner drives a luxury car.

(Report by Markus Wacket and Holger Hansen; edited by Ralf Bode. If you have any queries, please contact our editorial team at berlin.newsroom@thomsonreuters.com)