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Germany’s first steps towards a battery electric vehicle transition
Decarbonising the road transport sector is key to stop global warming. In Germany, governmental support for electric vehicles has been growing steadily over the past decade. So far, the results are rather modest, though.
Doubts about the effectiveness of adopted policy measures were raised by experts and the public. Yet, it is known from energy transition scholars that focussing on policies alone is insufficient to assess a transition’s success. A closer look into main transition drivers is necessary.
Starting off with defining Germany’s electric vehicle transition
A crucial indicator for assessing whether a new technology is successfully taken up is its stock increase. Currently, the total number of battery electric vehicles (BEVs) in Germany amounts to roughly 140,000. In contrast, in 2011 hardly any battery-powered vehicle rolled on German streets. This shows how BEVs gad began to penetrate the countries’ automobile market only recently.
Despite of a steady increase in BEVs over the past ten years, however, Germany’s transportation sector is still dominated by fossil fuel-based passenger vehicles. 75 percent of all vehicles registered in Germany in 2019 were fuelled with gasoline or diesel. Apart from the predominance of conventional cars in Germany, the data also displays how from 2016 onwards the number of annual BEV registrations begins doubling by each year. Either a shift in national politics or a major incident on the landscape level occurred.
Enabling conditions shaping Germany’s transition towards a low-carbon transport system
To identify the enabling conditions shaping Germany’s transition towards a low-carbon transport system, it is important to consider key characteristics of the regime in question. The German transport regime is embedded in a deep-rooted tradition of car manufacturing. With a turnover of over 435 billion euros, the automotive sector occupies a special position in the German economy. No other branch employs more people. Including supplier companies and service firms every fifth job in Germany depends on the automotive industry.
Because of its significant contribution to the country’s economic welfare, the automotive industry is of outstanding importance for Germany’s political leaders. Consequently, it possesses strong bargaining powers. Germany’s institutional setting further encourages it. The countries electoral system and its federalist structure have cultivated a political culture of seeking consensus and compromise. Therefore, the nature of relationships between interest groups, experts, policymakers, and bureaucracy is based on a pragmatic cooperation system.
All these circumstances allowed for resistance to be successful in constraining low-carbon changes to Germany’s transport system for a long period of time. It explains, among other things, why despite of Germany’s great success in decarbonizing its electricity system, the transport regime remains almost untouched from phase-out policies or emission control measures, like fuel consumption or carbon taxes.
Notwithstanding, the situation is changing. The German government has been increasingly promoting the use of BEVs, and the German car industry has been investing millions in R&D related to battery technology and electric based drive systems.
Transition drivers and policy feedbacks
Because of the car regime’s crucial importance to Germany’s economic health and growth, generally it faces only moderate pressure from the German government. So, which factors drove the transition initially, then?
According to socio-economic transition frameworks, one specific instance in which niche technologies can break through is if external developments, so-called landscape events, create pressure on the incumbent regime. In retrospect, two landscape factors seemed to have particularly contributed to Germany’s BEV transition and related policies.
First, in 2009 the European Union introduced a mandatory CO2 emissions cap of 130 g/km for newly registered vehicles for the year of 2015. In 2020 the target was tightened to 95 g/km. The initiative particularly affected German manufacturers because they are specialised in the production of high-power premium class vehicles with high emission rates. Although Germany’s automotive industry fiercely resisted the imposed climate targets, and asked the German chancellor, Angela Merkel, to intervene, finally, the European Parliament voted in favour.
In response to the EU’s CO2-limit-proposal for passenger vehicles, the German government launched a flurry of policies, initiatives and funding programmes related to electro-mobility. To only list the most important: National Development Plan for Electric Mobility (2009), National Platform for Electromobility (2010), Government Programme on Electromobility (2011), Electromobility Act (2015).
All the programmes and activities scheduled were intended to preserve the domestic automotive industry. According to the Federal Ministry of Transport, the German government funded around 5 billion euros. State’s support for innovation in BEVs was of great value for the automotive industry’s transition towards the electrification of their products, especially if considering that German car manufacturers did not commercialise BEV models until the year of 2013.
From shielding and nurishing to entering the market
Until this point in time, monetary incentives to promote consumer ownership were yet missing. This changed when the Dieselgate affair in 2015 occurred, the second landscape factor. For many years German carmakers, especially Volkswagen, manipulated the engines of their vehicles with a defeat device to cheat on emissions tests. The fraud came to light due to highly increased Nitrogen Oxide pollution levels recorded in many German city centres since 2013. The emissions scandal swept managers out of office, cost billions and damaged consumer confidence tremendously. Therefore, industry insiders agree that this scandal pressured Germany's car industry to change tactics and be more open towards engine alternatives, what ultimately prepared the ground for electromobility production in Germany.
To support the paradigm shift of VW, BMW & Co., in 2016 the Federal Government changed its electromobility policy scheme as well, introducing tax incentives and purchase subsidies for BEVs. Three market-driven policy instruments were now at the forefront of BEV promotion in Germany: temporary purchase incentives, fostering charging infrastructure and the public procurement of electric vehicles. In addition, Germany reduced the company-car tax in January 2019 and extended tax incentives for electric company cars through the end of 2030. It has also incremented purchase-price subsidies for BEVs.
As a result, the German manufacturers' model offensive is in full swing now. There are currently 60 electric vehicle models from German manufacturers on the market. According to McKinsey’s Electric Vehicle Index, in 2019 two German brands, BMW and VW, reached global top 10 positions in terms of electric vehicles sold.
To conclude:
As recent developments in the German automotive market show, the last government incentives, especially the car purchase subsidies represented a major driver of BEV adoption. In 2019, the registrations for BEV cars in Germany presented only 2 percent of the total market share. One year later, its share already increased up to 8 percentage points.
The Dieselgate scandal was identified as the main important influencing factor. However, not only the willingness of the incumbent car industry to position itself in this new market appeared to be decisive. The fact that Germany’s government supported its car industry all the way by including them in the decision-making-processes, funding and shielding did shape the transition’s outcomes as well.