EU Considers $22 Billion Electric Vehicle Stimulus, U.S. Mulls Cash-for-clunkers Redux

Matt Posky
by Matt Posky

The European Commission is reportedly preparing an economic stimulus package aimed at helping the EU bounce back from economic hardships caused by the coronavirus lockdown — saving some room for incentivized electric vehicle sales.

As you may have noticed in your home country, stimulus package proposals often involve lawmakers attempting to slip something in to aid their favorite causes. While not every nation in the EU feels similarly on all matters, environmentalism has been a reoccurring theme within the union — and has encouraged it to make aggressive decisions when it comes to promoting vehicles.

For decades, the European Union spent billions in subsidies and tax breaks to make diesel fuel cheaper than gasoline. Diesel engines produced less carbon dioxide and opened the door to biofuels, so the presumption was they were better for air pollution. That turned out not to be true, so the continent then pushed hard into subsidizing EVs, with diesel sales crumbling as a result.

Now seen as the only way to save the world from heavy, gas guzzling crossovers that people actually buy in great numbers, battery electric cars are getting their moment in the sun. And it may get a little brighter. The next EU stimulus package is set to include €20 billion ($22 billion USD) for those deciding to purchase an environmentally friendly passenger car.

According to German outlet Sueddeutsche Zeitung, the European Commission’s draft papers recommend setting aside €100 billion for the automotive sector — with a fifth of that going to “clean cars” over a period of two years. However, no one has been able to decide what qualifies as a “clean car.” Many also want to incorporate further incentives for those trading in older vehicles with worse fuel economy, similar to what the United States is considering with an updated cash-for-clunkers plan.

We expressed our thoughts on giving it another shot, but the opinion doesn’t vary much from takes given in 2009, when America first decided it was an ideal way to get people back into dealerships. The gist is that it didn’t really seem to play out like the government intended, and turned out debatably worse for the environment than simply encouraging people to continue driving older automobiles — though it did boost new vehicle sales in the short term.

The United States hasn’t discussed the matter much, even though it’s on the table, and the European Union seems lightly interested but nowhere near sold on the idea. Unfortunately, plenty of differing opinions exist on how far into the green the stimulus should be taken. Automotive News reported European Commission President Ursula von der Leyen’s take on carbon-friendly stimulus measures on May 13th.

“If it is necessary to increase our debt, which our children will then inherit, then at the very least, we must use that money to invest in their future by addressing climate change, reducing the climate impact and not adding to it,” she told the European Parliament.

In the draft, she suggested allotting half of the $100-billion package for transportation to be earmarked for the development of alternative drivetrains that would aid in reducing vehicle emissions and help automakers meet increasingly high carbon caps. Additional funding may be used to help build new charging stations to help spur EV adoption.

The European Commission plans on issuing an early draft of its economic recovery plan on May 27th, but not before a week’s worth of discussion occurs to get everyone on the same page. Those seeking to promote greener cars also have to contend with how cash incentives are basically free money funneled into the chosen industry — which is kind of the point of a stimulus package, when you boil it down.

Many argue that any vehicular incentives designed to help Europe recover from the economic damage that’s been done should go exclusively towards electric vehicles. Others say this is too stringent, and should instead incorporate internal combustion cars of above-average efficiency, or have bemoaned the plan as offering favorable treatment to specific automakers and models, many of which don’t sell in large volumes.

Germany’s transport ministry suggested including cars that emit 140 grams of carbon per km, which is way beyond the EU’s 2021 fleet emission target of 95 g/km. Sueddeutsche Zeitung noted that this would allow high-volume models like the Volkswagen Tiguan to be eligible for subsidies. Obviously, as the most car-focused of all EU member states, Germany wants to get automakers all the help it can. But German Chancellor Angela Merkel has repeatedly voiced that any economic stimulus package needs to incorporate the environment and serve to protect the climate, meaning the country probably won’t push for more than it’s currently asking for.

From Automotive News:

Such a move would be “completely unacceptable,” Stef Cornelis, from the Brussels-based lobby group Transport & Environment, told the paper. Stefan Heimlich, head of the European motorist club ACE, also criticized the German proposal, saying it would hurt, not help, automakers’ efforts to reach CO2 emission reduction targets mandated by the EU.

The European auto industry, the world’s second largest by production after China, has pushed for a coordinated and harmonized fleet renewal scheme for all vehicle types and categories.

On May 14, CEOs from major car and truck manufacturers and their suppliers met with members of the Commission to discuss a recovery plan for the automotive sector “with a view to stimulating the wider economy and bolstering the transformation to a carbon-neutral society.”

France’s Finance Minister, Bruno Le Maire said on May 18 that any aid offered to the industry by his government offered would seek to encourage sales of cars with lower emissions.

Sounds like there’s no chance of the stimulus pack not skewing toward promoting green tech; something we probably should have expected. We would caution Europe to be very cautious in how it allows this to play out. The EU could find itself looking at electric cars in a few years the way it views diesel today — especially now that we’re learning of some of the shortcomings of EVs and the concept of green energy. Still, few expect Europe to take a cautious or measured approach. Many countries in the region are already making plans to ban diesel sales and prohibit where internal combustion vehicles can drive, similar to what’s happening in the People’s Republic of China.

China incentivized EV purchases for years in an effort to encourage their growth. It worked for a while… until its government pulled the perks and sales fell off a cliff. Dumping money onto electric cars may only serve to prop them up while that extra cash is in play. (The Chinese market had other issues and was arguably in decline before subsidies were cut, giving us plenty to consider.)

Still, we think the best way to encourage EV adoption is to help build the infrastructure that supports them (e.g. charging stations). Give the industry the tools it needs to make these cars work for the population, stand back, and see what consumers do as the technology continues to improve. They might surprise you with their purchasing decisions.

[Image: nrqemi/Shutterstock]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • SCE to AUX SCE to AUX on May 21, 2020

    "Give the industry the tools it needs to make these cars work for the population, stand back, and see what consumers do as the technology continues to improve." With the exception of a universal charging standard, this has already been done, and is being done. The EV landscape will have even more choices in the next few years. EVs enjoy very high customer satisfaction, once someone actually gets one. The real battle is with the mfrs - they have little incentive to invest billions, and then to lose money on EVs when they can make a fortune on conventional drivetrains.

    • See 3 previous
    • Featherston Featherston on May 24, 2020

      @SCE to AUX +1 SCE to AUX - As I commented once or twice in 2019, a friend has a Model 3. He didn't have any philosophical predisposition toward purchasing a Tesla or an electric car in general; he just liked the Model 3 best out of the cars he cross-shopped. I skew KISS/Luddite in my tastes, so I'm not a fan of some of the Model 3's technology for technology's sake, specifically the door handles and HVAC controls. That said, I really like it on the whole. It's roomy (much better back seat than most of today's sedans), quiet, very fast, and (belying the criticism of some scribes) well put together. He's discovered that range anxiety is basically claptrap. He's used a public charger exactly twice: once just to see what it was like and once when we were at the midpoint of a 230-mile day trip. We probably could have made it home but thought, "Better safe than sorry." So that's approximately 20 minutes at a public charging stations for all the time he's owned the car versus all of the analogous stops for gas he would've had. (I've never found gassing up to be a big inconvenience, so I won't argue that it is. But I'd categorize "topping up" as either a push or slightly in the Tesla's favor.) One fly in the ointment is if you live in an apartment or old row house or street park. That scenario, yes, favors the current gas car paradigm. Apartment complexes with assigned spots? Not a tough upgrade in the vast scheme of things, IMO. Single family home scenario? As described above, that actually already favors the electric car for most owners. My friend's shift to using the Tesla has been fraught with all of the drama of using an electric stove rather than a natural gas stove.

  • Aja8888 Aja8888 on May 21, 2020

    What's the EU trying to save the world from? I mean it's been here for 6 Billion years without anyone trying to save it?

    • See 8 previous
    • Featherston Featherston on May 24, 2020

      @ Arthur - I'm not surprised that a Canadian with functioning grey matter got it right, but I'll give you a +1 anyway for using "Brits" rather than "English," as too many of us south of the 49th parallel conflate the two. I have a friend whose Scottish father served in Malaya, so I'm being persnickity on his behalf. One of my favorite WWII tidbits is the deployment of British forces at the Second Battle of El Alamein: I can only assume a logistical screw-up forced Monty to include the Northumbrian and Home Counties divisions in the front line rather than Canadian, Northern Irish, or Welsh units. The latter three would have been a more appropriate complement to the Aussies, Scots, Kiwis, South Africans, Indians, Greeks, and French. ;-)

  • Grant P Farrell Oh no the dealership kept the car for hours on two occasions before giving me a loaner for two months while they supposedly replaced the ECU. I hate cords so I've only connected it wirelessly. Next I'm gonna try using the usb-c in the center console and leaving the phone plugged in in there, not as convenient but it might lower my blood pressure.
  • Jeff Tiny electrical parts are ruining today's cars! What can they ...
  • CEastwood From zero there is nowhere to go but up . BYD isn't sold in the U.S. and most Teslas are ugly azz 90s looking plain jane drone mobiles . I've only seen one Rivian on the road and it 's not looking good for them . I live out in the sticks of NW NJ and EVs just aren't practical here , but the local drag strip thrives in the warmer months with most cars making the trip from New York .
  • Lorenzo Aw, that's just the base price. Toyota dealers aren't in the same class as BMW/Porsche upsellers, and the Toyota base is more complete, but nobody will be driving that model off the lot at that price.
  • Mike The cost if our busing program is 6.2 million for our average size district in NJ. It was 3.5 last year.