Car Summit: Merz promises "more room to maneuver" for the automotive industry.

The federal government wants to provide stronger support to the ailing German automotive industry - with new purchase incentives for electric cars and more flexible transitions to emission-free propulsion systems.

"There must not be a hard cut in 2035," said Chancellor Friedrich Merz (CDU) after a car summit with industry representatives in Berlin.

Then there should be in the EU a ban on new registrations of internal-combustion engine cars, but this is still under review. A new EV subsidy should mainly benefit low-income earners.

Top representatives from car manufacturers and suppliers, associations and unions, as well as from federal states with automobile production sites, were invited to the meeting. Merz emphasized that there is "a strategic interest" in maintaining a competitive, technologically leading automotive industry in the coming years and decades and in offsetting competitive disadvantages. That is partly the task of the companies, but partly also of politics. That sounded similar at earlier car rounds at the Chancellery. But the situation is delicate.

Industry under pressure

Germany's highly export-oriented automotive industry, with 770,000 employees and annual revenue of 540 billion euros, is in a difficult phase. The sector is fighting a sales slump, growing competition from China, and problems in the transition to electromobility. In addition, EU climate-protection requirements for lower CO2 emissions and tariffs on the US market. Many companies reported declines in profits, are pursuing austerity measures, and cutting jobs.

Extended tax exemption

Vice-Chancellor Lars Klingbeil (SPD) spoke of a dramatic situation. It must be about “that the car from Germany has a good future.” It has become clear that no one questions the path toward electromobility. An initial element was provided in advance by the Finance Minister: The exemption of pure electric cars from the motor vehicle tax should be extended to 2035. There had recently been uncertainty in the market whether an exemption would also apply to new registrations from 2026.

Purchase incentives – but not for everyone

Another element was presented by the government after a late-night session of the coalition committee, directly in the morning: a funding program is to come, aimed especially at households with low and middle incomes, to support the switch to climate-neutral mobility and emissions-free vehicles. The aim is to deliver tangible benefits for consumers, according to the resolution. Volume: three billion euros in addition through 2029. The modalities are still unknown. In France there is already a leasing program with a social component.

Signals on the phase-out of combustion engines

The focus is also on how to handle the 2022 decision to end the approval of new internal-combustion vehicles on the EU market from 2035, for which reviews are now due. The coalition had recently been split on that. Merz said now that electric powertrains are “the main road on which we travel.” But bringing them to market takes time, and he urged the industry to also advance other technologies for climate-neutral drives. And he said he would push for greater flexibility and openness in regulation.

Klingbeil said: “We don’t want to ram our heads through the wall.” Pragmatism is needed.

 “We have not put the reverse gear into the old combustion-engine world today,” commented Federal Environment Minister Carsten Schneider (SPD). “Instead, we have described a more flexible, more social transition into the new world.”