Refer Report
Volkswagen car plant in Wolfsburg, Germany. AP Yonhap News.
The German government has decided to revive some subsidies for electric vehicles, two days after Germany’s largest carmaker, Volkswagen, announced plans to close factories and restructure.
According to Reuters and other sources on the 4th (local time), the German federal government passed a tax reform bill at a cabinet meeting that day that would provide tax credits for companies purchasing electric vehicles. The German government said, “We are revitalizing electric vehicles through tax reform,” and “In the future, companies will receive special depreciation deductions for electric and zero-emission vehicles, and tax benefits for corporate electric vehicles will also be expanded.”
The tax credit applies to vehicles purchased between July of this year and December 2028. Up to 40% of the purchase cost of an electric vehicle can be deducted from taxes over six years. The government estimates that the tax savings will amount to an average of about 465 million euros (about 688.6 billion won) per year from 2024 to 2028.
The German government decided to abolish electric vehicle subsidies from the end of this year after the Constitutional Court ruled the budget unconstitutional in November last year, making austerity inevitable. Demand for electric vehicles, which had been declining due to the industry slump, has since plummeted, and automakers that were pushing forward with plans to switch to electric vehicles have also been hit. According to the German Federal Road Traffic Authority (KBA), the number of newly registered electric vehicles this month was 27,024, down 68.8% from August last year. The overall decrease in new vehicles during the same period was 27.8%.
A view of Volkswagen’s headquarters in Germany. Reuters/Yonhap News.
The industry sees this electric vehicle tax benefit as helpful to Volkswagen, which is struggling with management difficulties. On the 2nd, Volkswagen announced a large-scale restructuring, saying that it would close at least two factories in Germany due to worsening management and terminate the 1994 employment stability agreement that “no jobs would be cut in Germany until 2029.” This is the first time Volkswagen has mentioned closing a factory in Germany since its founding in 1983.
The German weekly Der Spiegel estimates that around 20,000 people will lose their jobs if the two Volkswagen plants are closed. The unions say they may go on strike to prevent the closures and layoffs. Torsten Kroeker, head of the Lower Saxony branch of the industrial union IG Metall, called Volkswagen’s decision “an attack on all workers.”
The government may also intervene directly or indirectly in the process of Volkswagen’s plant closure and restructuring. Volkswagen is legally prohibited from making important decisions without the consent of the government of Lower Saxony, where its headquarters are located, and the labor union. Lower Saxony owns a 20.2% stake in Volkswagen, so it can exercise veto power at the shareholders’ meeting, and the relocation or construction of a plant requires the approval of more than two-thirds of the supervisory board, half of which are labor union members.
According to a German government spokesman, Chancellor Olaf Scholz spoke to management, works council representatives and supervisory board members about the Volkswagen issue. Economics and Climate Protection Minister Robert Havek called on Volkswagen to consult closely with its “social partners.” Labor Minister Hubert Heil said plant closures and layoffs must be avoided.
Source: Korean