The plan includes 500 million euros (US$705.1 million) of funding for the construction of electric charging stations and programs to boost battery technology in Europe's biggest auto market.
"Our goal is to make Germany the leading market for electro-mobility," Economy Minister Karl-Theodor zu Guttenberg told reporters at a news conference in Berlin.
Germany's BMW, the world's largest premium carmaker, welcomed the plan, as did VDA carmakers association, whose president Matthias Wissmann called the program's success of "great importance" for Germany.
But an industry expert and another automaker were more skeptical, pointing out that demand for electric cars is weak and that mass-produced models are still years away.
"It is indeed helpful, but don't expect to see a sales rush like with the cash-for-clunkers program," Willi Diez, head of the Automobile Industry Institute in the southern city of Nuertingen told Reuters.
The government supported its car-scrapping subsidy with five billion euros 10 times more than the money now being allotted to develop the electric auto sector.
Chief Executive Rupert Stadler at Audi, a unit of Germany's Volkswagen, lowered expectations in a newspaper interview.
"In 20 years there will be mass-produced electric cars, but they should only make up around five to 10 percent of all overall automobiles," he told the Austrian Wiener Zeitung.