Germany Spurs Its Automakers to Produce Electric Cars

By · August 20, 2009

German Chancellor Angela Merkel at the 2007 Frankfurt Auto Show

German Chancellor Angela Merkel at the 2007 Frankfurt Auto Show. Merkel steps out of the Opel Flextreme, a plug-in diesel hybrid concept car from General Motors.

Germany is falling in the footsteps of the United States in making electric cars a priority. Chancellor Angela Merkel’s ruling coalition parties pledged this week to spend more than $700 million by 2011 on developing electric vehicles, as it tries to put 1 million electric vehicles on German roads by 2020. Earlier this month, the US Department of Energy announced $2.4 billion in grants to help reach President Barack Obama’s goal of putting 1 million plug-in cars on US roads by 2015.

The German government plans to spend approximately $160 million for testing introduction of electric cars in eight regions, and about $240 million on battery research. "The program is aimed at having a positive impact on investment decisions, give producers security and support the sale of electric cars," according to a copy of the plan obtained by the Associated Press.

German automakers have been reluctant to enter the hybrid and electric car race, preferring instead to focus on diesel technology as a fuel efficiency strategy. While US and Japanese automakers have a growing list of electric cars expected to hit the market in the next two years, Volkswagen, Daimler and BMW have been relatively quiet.

Volkswagen, the country’s largest automaker, hopes to produce its first electric cars in 2013, but has not revealed specific product plans. "Our focus in the future will be directed more strongly at making electrically powered automobiles alongside ones driven by more efficient combustion engines," Volkswagen Group CEO Martin Winterkorn said last year, when the company announced a partnership with Japan’s Sanyo Electric Co. to develop lithium ion batteries.

Daimler has demonstrated an electric version of the Smart ForTwo and unveiled its BlueZero concept vehicles, and BMW is currently leasing about 500 electric Mini Cooper prototypes (with some problems reported).

Still Just a Plan

“One million cars by 2020 is an ambitious but entirely achievable goal,” said Theodor zu Guttenberg, economy minister, at yesterday's news conference. “We’re taking steps to ensure that Germany’s automobile industry will preserve its leading role, that’s why progress in this area is important.”

Yet, the German plan already is meeting resistance. "At first glance this sounds rather like a nice PR story," Gregor Claussen, an analyst with Commerzbank, told Forbes. "But more will have to follow. Without the help and the right framework from the politics, it will not work." The plan is still vague, leaving uncertainty about future financing, and no details about consumer incentives for potential electric car buyers. Guttenberg said financing would be a question for the government that emerges from Germany's Sept. 27 election.

Some analysts believe the plan doesn’t go far enough. “Keeping in mind that this year alone about 3.7 million cars will be sold in Germany, the 1 million additional sales will have only a minor effect," Heiko Moehringer, an analyst with LBBW, told Forbes.

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