"The program is aimed at having a positive impact on investment decisions, give producers security and support the sale of electric cars," according to a copy of the plan, obtained by The Associated Press.
Germany's car companies have scrambled to catch up to their Asian competitors in electric technology.
Volkswagen AG has said it hopes to introduce its first electric cars on the market in 2013, while Daimler AG is working together with California-based electric car maker Tesla Motors Inc. on developing better battery and electric drive systems for vehicles destined for the consumer market.
Already the opposition Greens have criticized the plan for being too narrow in focusing only on electric automobiles, insisting that all cars running on renewable energy should be eligible for funding.
Earlier this month, President Barack Obama announced $2.4 billion in federal grants to develop next-generation electric vehicles and batteries in the United States.
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