The new era of mobility is defined by electrification, connectivity and efficiency. Ultimately, it’s one that will provide new growth opportunities for business and the economy, while safeguarding public health and helping to combat climate change.
As the German government discusses the future of mobility for the country, it’s critical they bear in mind a clear direction of travel for the auto sector and the opportunities that presents.
Business is demonstrating increasing demand for electric vehicles (EVs) through initiatives such as EV100, led by The Climate Group. Several EV100 companies - Metro AG, Eon, LeasePlan, Ingka Group (formerly IKEA Group) and Vattenfall - are calling for German policymakers to fast-track the switch to EVs, tackling climate change and addressing city air pollution – and allowing the country to stay a global car supply leader.
At this critical juncture, three things are needed to make e-mobility fly. Firstly, enabling exponential growth in electric vehicle sales, of which there are already positive early signs. Secondly the availability of sufficient charging infrastructure. And thirdly the ability of charging networks, cars and grids to work seamlessly together to make charging easy and efficient for customers; a system known as interoperability.
We’re not dealing with a chicken and egg problem here. Once good electric cars with a decent range and price are available on the market, both investment in charging infrastructure and customer services will follow suit. We’ve already seen this in countries like the Netherlands, where a clear government policy to get more EVs on the road, has given companies the confidence to invest in charging infrastructure and interoperability arrangements.
The good news is that already now there is a climate-friendly alternative to gasoline and diesel vehicles for the average purse. EVs are now increasingly cost competitive and can achieve ranges that rival many traditional cars, as LeasePlan’s 2019 EV Readiness Index shows.
Meanwhile, leading car makers are embracing the EV revolution, racing to roll out new models and collectively investing billions in electric mobility. Just this month, Germany’s Volkswagen doubled down on its commitment to the e-mobility future and announced it will launch 70 fully electric models by 2028, up from an earlier pledge to launch 50 by 2025. It is difficult to underestimate the importance of the turnaround VW is currently making under its new CEO Herbert Diess, in a country that has been relatively slow to embrace the benefits of e-mobility.
Automakers like VW are responding to the more ambitious 2030 EU CO2 emission standards for passenger vehicles, which were adopted in December 2018. They are also embracing a surge in demand for e-mobility, which saw European EV sales jump by a third (33%) in 2018, from 2017.
What policy makers can do
In its final Working Group meeting, Germany’s mobility commission, the National Platform Future of Mobility, failed to agree on concrete and effective recommendations on how to fully achieve the official target of reducing emissions in the transport sector 40-42% by 2030, compared to 1990 levels. A hefty task indeed considering that emissions in Germany’s transport sector have risen since 1990.
Being a relative laggard when it comes to e-mobility deployment, Germany has the advantage of not needing to reinvent the wheel, but rather implement best practices already in place in countries like Norway, the Netherlands and Sweden.
In order to give the market security about the direction in which it is heading, Germany will first and foremost need to cement its sector targets from the 2016 Climate Plan in a Climate Act, with binding sector targets.
Secondly, the taxation of cars has shown to be a very effective measure to get more EVs on the road, as has been seen in the Netherlands and Norway. Sweden recently introduced a quite elegant ‘bonus-malus’ taxation for vehicles, which links to the CO2 emissions of cars under the EU driving tests, puts a tax on cars with high CO2 emissions and gives a bonus towards zero-emission, clean and electric vehicles. The big advantage of a bonus-malus system is that it is budget neutral for the government and that it can be steered year by year.
In the same way, it will be important for Germany to adjust the taxation rules for company cars. Since the start of January this year, both hybrid and fully electric cars benefit from a 50% tax discount. It makes sense to link the taxation levels to the actual emissions of a vehicle and only give zero-emission vehicles the full tax discount. This has the potential to strongly increase the demand for full EVs that will actually use charging infrastructure.
Thirdly, Germany needs a steady reduction of the current diesel tax rebate of currently 18 cent per liter. There is no other country in Europe where the ratio between end-consumer electricity and diesel prices are as unfavorable as in Germany. For cost-conscious fleet owners, this is a major bottleneck to more aggressively moving into e-mobility.
These three measures will effectively increase the demand for EVs in Germany and - when complemented with measures to facilitate the roll-out of charging infrastructure - will make it easier for consumers and businesses to transition to EVs.
Time to power up charging infrastructure
With a growing uptake of electric vehicles it is also about time to power up charging infrastructure build-out. One thing that all stakeholders should have at the top of their list is to heavily standardise and simplify the process. For example, Germany has about 800 distribution grid operators and they all have different requirements and processes for charging infrastructure. On top of that, local building authorities often take months to provide a grid operator for any specific location. Everyone should do their part to prepare for bigger numbers, but some clear guidance at the national level would really help there.
From our experience in the Netherlands, we also know that tenders are a very effective tool to speed up charging infrastructure build-out. Longer operating durations and sufficient scale (over 500 charging points per bid) have proven to bring down costs to such a point that public charging infrastructure in the Netherlands can already be developed subsidy-free.
Finally, as we know most charging takes places in buildings - either at home or at work - we must also do our homework there. Last year’s German Coalition agreement already announced support for private and company charging points and there really is no reason to wait any longer.
All of these measures can support a smooth and rapid transition to the e-mobility future, while having a clear and ambitious timeline for the end of internal combustion engine sales will help achieve the emission reduction targets for the German auto sector.
Ultimately, the German government can best seize the opportunity by sending a clear signal to business that the direction of travel is a progressive electrification of road transport. This will help ensure the German auto industry remains a global leader and that customers can enjoy cleaner air and electric driving fun.
This article first appeared in Handelsblatt.