German cabinet approves EV tax relief amid Volkswagen’s SOS

The German cabinet has approved tax reductions to promote the use of EVs, according to a Reuters report that quoted a government source.  

Germany hopes to boost the uptake of EVs, with registrations falling by 36.8% in July year-on-year. 

The tax breaks will be worth about EUR 465 million (USD 514 million) annually between 2024 and 2028. 

The move comes after German automaker Volkswagen said it was mulling closing its factories in its home country, a potentially unprecedented move in its history. 

Economy Minister Robert Habeck said the government would continue to support the German car industry’s transition to EVs.  

Volkswagen, one of the world’s biggest car companies, has warned it cannot rule out plant closures in Europe’s largest economy as a cost-cutting measure amid rising competition from China’s EV brands.

“The European automotive industry is in a very demanding and serious situation,” said Volkswagen Group CEO Oliver Blume. “The economic environment became even tougher, and new competitors are entering the European market. Germany in particular as a manufacturing location is falling further behind in terms of competitiveness.

Volkswagen is losing market share in China, its single biggest market. In the first half of 2024, deliveries to customers in China dropped 7% compared to the same period last year.  

The uninspiring performance in China comes as Volkswagen loses out to local Chinese EV brands such as BYD.