Dieter Zetsche, the head of car giant Daimler, said the German government needs to fund purchases of electric cars or risk sector leadership to move to France or China.

"If the German government really wants a leadership position for the German market, then it will have to introduce direct purchase funding," Zetsche told German business daily Handelsblatt. "If it decides against the funding, the government should not pursue its goal of making Germany a leading market."

The United States, France and Italy -- nations with powerful car sectors that vie for market share with their German competitors Daimler, Volkswagen and BMW, have already introduced purchase funding ranging from $5,000 to $9,000 per car. Even notoriously indebted Ireland is dishing out around $3,400 per each new electric car purchase. Berlin has been cool toward such purchase incentive models and has instead decided to fund research and development.

Zetsche has a chance to confront Chancellor Angela Merkel in person this weekend in Stuttgart, where both will attend events celebrating what Daimler says is the 125th anniversary of the automobile, invented in 1886 by Gottlieb Daimler.

The transition to electric cars constitutes "a second invention of the automobile," Zetsche said.

He added that the car park of the future will be a mix of all-electric, hybrid and hydrogen vehicles.

"A producer that only focuses on one way risks the future of the company," Zetsche said.

All major car makers are working on an electric car but it will be a losing business in the first five years, Zetsche said. "We will all be spending a lot of money and not get anything in return," he said.

Eager to reduce the dependency on imported oil and cut carbon dioxide emissions from road traffic, the German government said it wants to have 1 million electric cars cruise its highways by 2020.

Merkel is against funding electric car purchases and has instead earmarked around $700 million for sustainable mobility research and development, including programs to develop the charging station infrastructure and boost battery technology, an area of expertise that has long belonged to Asia.

Germany's powerful car industry has been criticized for being a tad late to the electric car game, with rivals from France and mainly Asia one to two years ahead when it comes to launching serial production.