BERLIN, GERMANY - The German government has agreed to limit the scope of plans it announced last week to offer tax breaks on new cars, government sources said on Wednesday.

The government plans are designed to help the auto industry, which accounts for roughly 20% of German jobs, and is part of a package to give Europe's biggest economy a 50 billion euro (S$94.6 billion) boost in investment and contracts.

But under pressure from the Social Democrats (SPD), who share power with Chancellor Angela Merkel's conservatives, the government has agreed to limit the tax breaks to cars registered by the end of June next year, said government sources.

Originally, the breaks had been envisaged to cover cars registered by 2010.

All cars registered by June next year will now be exempt for tax for one year and those with low emissions for two years. The length of the exemption is unchanged.

The newly-imposed limits are an interim measure as the government will draw up new rules to help boost sales of environmentally-friendly vehicles by next June, said government sources.

The SPD had argued the original plans had offered too much financial support to expensive, fuel-guzzling cars and wanted to increase the incentives for consumers to buy environmentally-friendly cars.

Handelsblatt daily also reported that the VDA automotive association was in talks with the government about possible aid for the supplier industry, citing sources from the sector.

However, there were no concrete ideas yet, said the paper.

(Reporting by Andreas Moeser; Writing by Madeline Chambers; Editing by Victoria Main)