German Chancellor Friedrich Merz's ruling coalition has approved new incentives for zero-emission vehicles amounting to 3 billion ($3.5 billion) through 2029, part of a larger initiative to assist struggling automakers.
Merz announced these measures, aimed at low- and middle-income families, following discussions with his Social Democrat partners in Berlin. He is set to meet with top auto executives and labor leaders on October 9 to discuss the industry's future amid rising competition from China and uncertainties over U.S. trade tariffs.
"We are committed to doing everything possible within the coalition to secure a bright future for the German automotive sector," Merz stated alongside Finance Minister Lars Klingbeil, the SPD co-leader and vice chancellor.
The coalition, which took office in May, was expected to support Merz's proposal for the EU to revise its 2035 ban on new combustion-engine vehicles. The chancellor mentioned further discussions with automakers on the ban and aims for a unified coalition approach.
Merz's remarks suggest a shift from his earlier stance on urging the EU to eliminate the ban, as his SPD partners grapple with internal disagreements.
The government intends to consult the automotive industry on its needs and is awaiting the European Commission's review by year-end, Merz indicated.
"We seek to ensure that decisions made in the EU are appropriate and necessary for the German automotive industry," Merz added.
Klingbeil supported the call for allowing new plug-in hybrids and combustion-fired range extenders beyond 2035, hinting at a forthcoming agreement.
Initially, some senior SPD members, including Environment Minister Carsten Schneider, opposed easing the ban.
"For us in the SPD, what unites us is the desire for a robust automotive industry that secures current jobs while also establishing foundations for future employment," Klingbeil stated.
Following the auto summit on October 9, the coalition plans to urge the EU for more flexibility in achieving fleet emissions targets. Merz will need to rally his EU counterparts to back Germany's stance on the combustion ban. The European Commission is expected to propose assistance for automakers by the end of the year.
This could involve greater leeway for automakers regarding the 2030 goal of a 55% emissions reduction, potentially through a multi-year averaging system, similar to adjustments made for the 2025 target earlier this year.
However, there remains hesitance to change the target of only selling zero-emission vehicles after 2035. The Commission has already pledged to create an exemption for e-fuels, derived from captured CO2 and renewable energy, which could also fuel new combustion-engine vehicles, plug-in hybrids, and range-extended vehicles.
