German Government Will Slowly Cut Incentives on EVs

The government believes strong sales and high profits mean the time is right to cut back on EV subsidies.

byLewin Day| PUBLISHED Jul 27, 2022 6:52 PM
German Government Will Slowly Cut Incentives on EVs
05 July 2022, Lower Saxony, Emden: Two Volkswagen Passat vehicles and an all-electric Volkswagen ID.4 stand in front of the administration building at Volkswagen AG’s Emden plant. The company has started series production of the all-electric ID.4 compact SUV at its plant in Emden, East Frisia. Photo: Hauke-Christian Dittrich/dpa (Photo by Hauke-Christian Dittrich/picture alliance via Getty Images).

The German government has begun to wind back incentives for customers to buy electric vehicles, reports ABC News.

The government announced in December that it would be scaling back EV incentives starting in 2023. The aim is to only subsidize vehicles that "demonstrably have a positive climate-protection effect."

Current subsidies offer buyers of fully-electric cars up to €6000 ($6100). A lower incentive of up to €4500 ($4600) is available for those purchasing a plug-in hybrid vehicle.

Going forward, subsidies for fully-electric and fuel cell vehicles will be scaled back to €4500 ($4600) for vehicles costing up to €40,000 ($40,100). A smaller €3000 ($3050) subsidy is available for vehicles sold from €40,000 to €65,000 ($40,100 to $66,300).

Plug-in hybrids will no longer be eligible for any incentives. Additionally, the subsidies will only be made available to private individuals from September 2023. Businesses will be exempt. However, the government is exploring options to keep subsidies available for smaller businesses and charities.

The incentives are set to wind down further in 2024. The incentive will drop to €3000 ($3050), and it will only apply to cars under €45,000 ($46,000). The overall scheme will end when the allocated €2.5 billion ($2.55 billion) in funding runs out. Beyond that, only tax incentives will remain.

The move comes against a backdrop of German automakers reporting strong profits. This indicates that the subsidies are no longer required, Finance Minister Christian Lindner said on Wednesday.

The government's target is to have 15 million fully-electric cars on the road by 2030. Over 600,000 fully-electric vehicles are registered in Germany, with 328,000 sold last year alone. Overall, plug-in hybrid and EV sales make up a total of 26% of new car purchases in Germany. Sales will have to tick up significantly to hit government targets by the end of the decade, but the country has seen signifcant year-on-year growth in the EV market for some time now.

It seems unlikely that a gentle windback of subsidies will dull the uptake of EVs in Germany. The government has set lofty targets for the future, but it appears that the country is well on the way towards a fully-electric future.

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