18 Dec 23

Cash-poor Germany ends private EV subsidies 

Faced with a severe budget crisis, the German government has abruptly ended the subsidy of up to €4,500 for the purchase of a new EV. The measure only applies to the private market. 

The so-called ‘environmental bonus’ to support the purchase of EVs on Germany’s private market was supposed to end on 31 December. Instead, it was cancelled with immediate effect on 17 December. 

Budget crisis

Government incentives for the purchase of EVs by corporate customers already ended on 1 September of this year. That phase-out had been announced well ahead of time, so it had no unexpected effects on the purchasing intentions of corporate fleets.  

The suddenness with which the subsidies for purchasing private EVs were cancelled is an indication of the seriousness of Germany’s budget crisis. Only a few days earlier, the German government had said it would not continue the subsidy in 2024 at the previously agreed reduced rate of €3,000. 

By cancelling the subsidy now instead of at the end of the year, the government effectively prevents the private market to go on an EV buying binge – saving itself the subsidies it would otherwise have had to pay out.  

Negative effect

This will have an obvious negative effect on overall EV sales in Germany this year. Tesla for instance had targeted 1.8 million vehicles sold in Germany this year, but would need to sell just over 475,000 units to do so. The company had offered special loan rates for consumers to benefit from the last few weeks of subsidies.

While this measure has a direct impact on the private market alone, it could have wider repercussions. Industry insiders fear it may have a negative impact on the rollout of EVs in general across Germany. OEMs may be less keen to push EVs, or may be forced to lower their list prices to compensate, wholly or partially, the incentive that has now been abolished. 

Germany is not the only market where EV incentives have been markedly rolled back in recent days. On 15 December, France effectively limited its EV subsidies (of up to €7,000 per unit) to cars made in Europe. 

Image: Shutterstock 1226168443 

Authored by: Frank Jacobs