Amidst escalating energy costs, insufficient infrastructure, and fluctuating policies, the German automotive industry continues to lose momentum. To address these challenges, the newly elected federal government has proposed an "Eight-Point Plan for Electric Vehicles" in their coalition agreement, aiming to reshape the domestic support system for electric vehicles.

Since the Nord Stream pipeline explosion in 2022, discussions about the German automotive industry and its global competitiveness have centered on three critical issues: high energy costs, inadequate policy support and path regulation, and lagging infrastructure. These systemic problems are eroding Germany's traditional manufacturing advantages.

Currently, the local demand for electric vehicles is weak, energy prices remain high, and the global race for new energy solutions is accelerating, increasing external competitive pressure. Coupled with the threat of new tariffs proposed by the United States on the European Union, thousands of jobs in Germany's automotive supply chain face a direct crisis, underscoring the urgency of transformation.

Against this backdrop, the incoming "black-red" coalition government (CDU/CSU and SPD) has prioritized the popularization of electric vehicles, intending to revitalize the industrial support system through the "Eight-Point Plan for Electric Vehicle Development." However, whether this can truly rectify fragmented past policies, accelerate implementation, and improve local conditions for German enterprises remains a critical proposition awaiting verification.

"Correcting Wrongs" Policy Revision

Faced with the worsening situation, the new federal government has explicitly listed electrification as a core priority in the coalition agreement, aiming to rectify past lags and deviations through systematic policy interventions. On April 12, the German edition of Business Insider reported that the new government had formulated a draft of the "Eight-Point Plan for Electric Vehicle Development," intending to reshape the industrial structure through a comprehensive set of measures.

The plan's core content spans multiple aspects, including tax incentives, consumption stimulus, and infrastructure construction. In terms of tax policy, the government plans to increase the tax incentive cap for company cars from €70,000 to €100,000, encouraging businesses to purchase higher-value electric vehicle models. Additionally, the plan introduces a special depreciation mechanism allowing companies to accelerate the depreciation of electric vehicles, providing substantial tax relief and boosting purchasing enthusiasm.

On the consumer front, the government intends to extend the tax exemption period for electric vehicles until 2035, fostering consumer confidence through stable policy expectations. Furthermore, it introduces a funding mechanism for low- and middle-income families, leveraging the EU Social Climate Fund to broaden electric vehicle popularity in the mass market, addressing the current issue of high electric vehicle consumption levels.

Infrastructure construction is also a top priority. The plan clearly proposes accelerating the nationwide fast-charging network, particularly deploying new-generation fast-charging stations along highways, and promoting the construction of a dedicated charging network for electric trucks. From 2026, zero-emission trucks will be exempt from highway tolls, effectively reducing operating costs for new energy commercial vehicles.

Notably, the last two measures reflect the new government's pragmatic approach in selecting technology routes: on one hand, it plans to provide regulatory support for plug-in hybrid and extended-range electric vehicles; on the other hand, it proposes simultaneously promoting the infrastructure development of hydrogen-powered commercial vehicles, indicating a shift from sole reliance on pure electric vehicles to encouraging the parallel development of multiple paths.

Overall, the "Eight-Point Plan" forms a comprehensive layout framework encompassing taxation, subsidies, and infrastructure, but its effectiveness hinges on subsequent implementation speed, cross-departmental coordination, and cooperation efforts among various states.

The new government's positive policy signals have swiftly received industry acclaim. In March this year, Volkswagen Group submitted a "Master Plan for a Competitive German Automobile Market" to the negotiating representatives of potential ruling parties, echoing many of the new government's ideas. Volkswagen emphasized that for a fundamental transformation, the German automotive industry must focus on electrification, digitization, and supply chain localization.

According to Handelsblatt, this 11-page planning document begins by stating that "the German and European automotive industries are at an extremely critical stage," proposing that "only by establishing a complete value chain supporting transformation and converting innovation into sustainable business models can we achieve prosperity for all" and warning policymakers to prevent transformation discussions from being torn apart by extreme political forces.

In specific recommendations, Volkswagen calls for a significant reduction in industrial electricity prices to below 6 cents per kilowatt-hour to ensure the global competitiveness of the European battery industry chain; otherwise, future investments in new energy vehicles may shift to the United States and China. Additionally, the government urgently needs to establish a unified and flexible regulatory framework for autonomous driving and software-defined vehicles (SDVs) to maintain Germany's standard-setting power in international intelligent vehicle competition.

The German Association of the Automotive Industry (VDA) also expressed a similar stance in response to the coalition agreement. While affirming the new government's initial progress in electric vehicle tax incentives and energy supply stability, the VDA pointed out deficiencies in implementation speed, refinement of technology openness policies, facilitation of SME financing, and infrastructure construction assessment. In particular, the policy support for plug-in hybrid models and e-fuel technology paths remains unclear, increasing uncertainty in upstream and downstream decision-making.

The VDA's concerns are justified. Taking charging infrastructure as an example, a 2024 survey report by the German Federal Cartel Office revealed high concentration in the highway charging station market, with operators like Tank&Rast monopolizing resources through long-term exclusive agreements, leading to abnormally high charging prices in some areas and inhibiting electric vehicle usage. The report recommends temporary contracts, mandatory open bidding, and a user-free electricity selection mechanism to reshape the competitive environment. However, transitioning from policy suggestions to actual implementation will take time, and the infrastructure bottleneck is unlikely to ease in the short term.

Hidden Concerns Amid Positive Signals

Meanwhile, the reality of differentiated local implementation further proves that regional imbalances are intensifying, complicating the overall transformation. Despite the new federal government's active promotion of electrification, German states exhibit significant variation in policy implementation strength and pace.

Baden-Württemberg, for instance, led by the Green Party, implemented an environmental zone policy restricting old diesel vehicles from entering Stuttgart's center in 2019, actively expanding public charging networks. These measures reduced urban pollution and increased electric vehicle penetration but also raised concerns about rising costs among businesses and citizens.

In contrast, Schleswig-Holstein struggles to convert abundant wind energy into charging network capabilities due to weak grid infrastructure, leading to low electric vehicle penetration locally.

As a crucial base for Germany's traditional automotive industry, Bavaria, despite BMW's active deployment of new energy strategies, has been relatively conservative in transformation policies. The state government emphasizes protecting employment and supply chain integrity in the internal combustion engine industry, advocating for delaying the fuel vehicle sales ban and supporting multiple technology paths. This inconsistency in local policies disrupts Germany's nationwide electrification transformation, weakening overall synergy.

Beyond policy uncertainty, funding bottlenecks have emerged as a new constraint. The federal government's planned €212 billion green infrastructure budget is currently frozen due to constitutional budget challenges. This funding delay directly impacts local government projects in charging networks and hydrogen energy transportation, exacerbating regional development imbalances.

The actual utilization of charging infrastructure also highlights structural contradictions in the transformation process. According to the Federal Association of Energy and Water Industries (BDEW), as of 2024, Germany's public charging points had an overall utilization rate of only about 17%, with many facilities idle, prompting operators to reduce expansion plans. BDEW believes that the marginal benefits of short-term infrastructure expansion are limited, and the key to stimulating electric vehicle demand lies in reducing vehicle prices and usage costs.

Against this backdrop, German industry experts generally agree that while expanding charging infrastructure remains important, the key factor determining electric vehicle popularization has shifted to reducing vehicle prices. Compared to other European countries, Germany is already advantageous in infrastructure and should focus on reducing vehicle purchase costs and introducing more entry-level electric models to enhance market attractiveness.

However, before internal improvements gain momentum, the global situation has added significant pressure. In April 2025, the US government announced a 25% special tariff on European automotive products. According to the German Foreign Trade Association (BGA)'s latest forecast, this policy will cause a 2.7% decline in Germany's total exports, with the automotive industry hardest hit.

The Center of Automotive Management (CAM) analysis points out that Volkswagen and Audi brands face particular risks, as the group's US local production ratio is only 20%, heavily relying on exports from Mexico and Europe, directly exposing them to tariff impacts. Simultaneously, the US plans to impose tariffs on Mexican-made vehicles, dealing a double blow to German automakers reliant on the North American Free Trade Agreement (USMCA).

The German Institute for Economic Research (IW) warns that if trade conflicts escalate, Germany's economic output could decline by 1%, potentially leading to the loss of about 300,000 jobs. While brands like BMW and Mercedes-Benz partially hedge risks by increasing US local production capacity, the US, as Germany's crucial automotive export market, imported nearly 450,000 vehicles in 2024, accounting for over half of European exports to the US. Any turmoil will significantly impact the industrial chain's stability.

A more far-reaching issue is that the global protectionism wave is eroding the global supply chain model long relied upon by German automakers. The German automotive industry must accelerate supply chain diversification, localized production, and independent breakthroughs in key technologies to maintain resilience and living space in a turbulent international environment.

Transformation: A Protracted Battle

Overall, the new federal government and industry have aligned on the general direction, but realizing the German automotive industry's transformation and revitalization remains a challenging and prolonged battle. Structural issues such as lagging infrastructure, fragmented local implementation, high energy costs, and intensifying global market protectionism are intertwined, ensuring that the transformation process will inevitably be fraught with challenges.

Looking ahead, the German automotive industry faces approximately three potential transformation pathways: with robust policy implementation, accelerated infrastructure upgrades, and a gradually diversifying supply chain, German enterprises retain the potential to reclaim leadership in the global new energy landscape. Should reforms falter and external shocks spiral out of control, they risk plunging into a perpetual decline in competitiveness. Conversely, if technological advancements are achieved in key areas, sustaining a medium-to-high transformation pace, the German automotive industry may navigate fluctuations with relative stability. Ultimately, success or failure hinges on the interplay of policy determination, industrial resilience, and the external environment.

Note: This article originally appeared in the "Global Vision" section of the May 2025 issue of Auto Review magazine. Stay tuned for more updates.

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