By William Boston
BERLIN--Earlier this year, a top aide to Chancellor Angela
Merkel fired a question at German auto chiefs during a closed-door
meeting on the country's most important industry: What are you
going to do about Tesla?
The answer emerged Wednesday, after the German government and
the chief executives of Volkswagen AG, BMW AG and Daimler AG agreed
to kick-start Germany's sluggish electric-car market.
Under the plan, anyone who purchases a new electric car will be
eligible to receive a rebate of EUR4,000 ($4,519) for a
battery-electric car or EUR3,000 for a plug-in hybrid.
The government agreed to provide slightly more than EUR1 billion
to subsidize new electric car purchases and finance expansion of a
network of public charging stations. In exchange, car makers agreed
to pay half the costs of the subsidies and step up investment in
research and development of batteries and other technology.
The hitch: only electric cars with a price tag below EUR60,000
are eligible for the cash incentive.
That is a bone tossed to conservative critics of the plan who
wanted to avoid allowing well-heeled consumers to finance purchases
of electric versions of expensive luxury cars with taxpayers'
money.
But it also erects a wall to keep Tesla Motors Inc., the U.S.
upstart, from gaining a foothold in Europe's biggest car market
with its current lineup of luxury electric cars.
In 2015, Tesla's Model S luxury sedan ranked third behind the
Renault Zoe and the Nissan Leaf in unit sales of battery-electric
cars in the European Union. Volkswagen's e-Golf came in fourth
place and BMW's i3 city car a distant sixth.
The automobile was invented in Germany and 150 years later it is
the country's most important industry, providing one in every seven
jobs and the lion's share of industry-related research and
development.
Now, the government fears that Germany's leadership is
threatened by a massive change in the industry that is leading to
the emergence of electric car startups like Tesla and new
technology players from Silicon Valley and Asia.
It's not just electric cars. As German engineers work on
developing self-driving cars, big tech firms like Google parent
Alphabet Inc. and Apple Inc., in addition to other car makers, have
emerged as competitive threats.
"The reinvention of the automobile is mainly being driven by
companies that do not have their headquarters in Germany," Sigmar
Gabriel, Germany's economy minister and leader of the Social
Democrats, told reporters.
Mr. Gabriel, junior partner in Chancellor Merkel's center-right
coalition government, compared the government's decision to support
development of electric cars with moves in the 1960s to create
Airbus, the European maker of large jetliners, to protect aviation
jobs and prevent the U.S. from building a monopoly.
"Back then, we provided massive assistance," he said. "And today
we are in a similar situation."
Production of the most important component in the electric
vehicle, the battery, is dominated by large Asian manufacturers
such as Samsung Electronics Co., LG Electronics Inc. and Panasonic
Corp.
Germany's electric-vehicle plan includes aid for research and
development of next-generation battery technology and a commitment
from German car makers to develop the technology at home.
Tesla, which only began making cars a few years ago, has become
the most respected brand in the new electric car sector. Its
battery-powered Model S sedan has even outsold Mercedes' iconic
S-Class luxury sedan in some markets.
Now, Tesla is preparing to launch a mass-market battery-electric
car called the Model 3. When the company unveiled the plan
recently, nearly 300,000 customers paid Tesla $1,000 to preorder
the car.
Some analysts see the Model 3 as a more serious threat for
Germany's car makers. With a price tag of around $35,000 it will be
affordable for a larger group of consumers.
Initially, opposition to supporting the German car industry was
strong. German Finance Minister Wolfgang Schäuble was a staunch
opponent, saying it's not the state's job to sell cars.
The auto industry lobbied hard. BMW Chief Executive Harald
Krüger met Mr. Schäuble in his office at the finance ministry in
March to press the industry's case. The enormous response to
Tesla's preorder campaign for the Model 3 melted any remaining
doubts about the need for urgent action, according to a person
familiar with the situation.
The German plan is nearly tailor-made to stop Tesla. Besides the
cap on the ticket price, the rushed timing and limited duration of
the plan means it will be over before Tesla's Model 3 is
launched.
"It's first come, first served," Mr. Schäuble said.
Write to William Boston at william.boston@wsj.com
(END) Dow Jones Newswires
April 27, 2016 11:01 ET (15:01 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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