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Germany will reduce financial incentives to buy electric cars next year after an agreement within the governing coalition, as the vehicles’ growing popularity makes government subsidies unnecessary, Germany’s economy ministry said on Tuesday.
The incentives, or premiums, paid to buyers of electric cars will expire completely once an allocated sum of €3.4bn from the next two years’ budget is spent, according to government sources.
“E-vehicles (EVs) are becoming more and more popular and will no longer need government subsidies in the foreseeable future,” economy minister Robert Habeck said in a statement.
Under the plan, premiums for fully electric-powered vehicles priced below €40,000 will fall to €4,500 at the beginning of next year from €6,000 currently, and fall to €3,000 in the following year.
For cars priced over €40,000, the premium will drop to €3,000 at the start of next year from €5,000 currently.
There is no subsidy for the purchase of cars priced over €65,000, and that will apply to vehicles priced at €45,000 and more from 2024.
Subsidies for company cars will be eliminated, with only private consumers benefiting from the scheme.
The government will also axe incentives for plug-in hybrid cars at the end of the year — something that the economy minister had advocated due to doubts over the double-engined vehicles’ climate credentials, as they are heavier and the battery-powered mode often lasts for only short distances.
“For the forthcoming funding phase, we are placing a clear focus on climate protection and are concentrating funding on purely battery-electric vehicles,” Habeck said in a statement.
The German cabinet is expected to sign off on a draft climate-action budget to provide the funding for the scheme on Wednesday.
Sales of all-electric cars almost doubled to 328,000 in 2021 compared to the previous year, thanks in part to the scheme. There are now over 600,000 electric-powered vehicles on German roads. Including hybrids, there are well over a million.
The share of purely electric cars in new-car registrations in Germany recently came in at about 14%.
Volkswagen has the largest market share for electric cars in Germany at 20.3%, followed by Tesla with 11.2%, according to the latest figures from motor-vehicle authority KBA.
The VDA auto association criticised the planned subsidy cuts.
“In times of rising costs and burdens, the decision to unilaterally and comprehensively cut funding is incomprehensible,” VDA President Hildegard Mueller said in a statement.
She also slammed the move to exclude company cars from the initiative, saying that “a switch to e-mobility is needed in all fleets”.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.