Germany Doubles EV Incentives, Conventional Cars Get Nichts

Carmakers the world over are struggling with one of the worst years in modern history. First, the coronavirus forced factories to shut down for weeks on end. Then, the loss of employment for many has made people more concerned about paying their rent or mortgage than buying a new car. The situation is the same in every country, but some nations are targeting economic recovery measures that advance clean energy and transportation goals while some are content to ladle out billions of taxpayer dollars to oil and gas companies.

Germany is firmly in the first category. (We’ll leave it to you to determine who is in the second.) German auto dealers have been pleading for incentive programs to help move oceans of unsold cars, but the government has decided it will incentivize only the purchase of plug-in hybrid, 100% battery electric, and hydrogen fuel cell cars.

Under the terms of a newly announced €130 billion economic recovery package, buyers of those cars will get double the current incentive — €6,000 rather than €3,000 — until the end of 2021. In addition, manufacturers will kick in another €3,000, bringing the total available incentives up to €9,000. Buyers of conventional cars get nothing.

That last statement needs some explanation. The general sales tax (VAT) will be reduced from 19% to 16% across the economy, and that does apply equally to all new cars, according to a report by Fleet Europe. However, there are no real incentives for fully fossil fueled cars.

There are some restrictions for the plug-in car subsidies. The full incentive only applies to cars with a sales price of less than €40,000. That will be a huge boon to both Volkswagen, which plans to introduce its ID.3 and ID.4 battery electric cars before the end of this year, and Tesla, which may have its Berlin factory up and running before the enhanced incentive period expires.

Other companies with electric cars to sell in the German market — like KIA, Hyundai, and Peugeot — will also be beneficiaries of the new incentive program. It may also give a boost to fuel cell powered cars. Although, that remains to be seen — they haven’t exactly been competitive with plug-in cars up to this point.

Electric cars costing less than €60,000 will be eligible for reduced incentive package — €7,500 per car. Plug-in hybrids get a price cut of €6,750 (vehicles below €40,000) or €5,625 (vehicles that cost between €40,000 and €65,000).

“Reduced company car tax for EVs also sees a boost — the 0.25% reduced rate now applies to a raised ceiling of EVs with list prices up to €60,000 (from the previous €40,000),” our own Maximilian Holland adds alongside a report about Germany’s EV market share reaching 7.3% in May.

According to Teslarati, the entire stimulus package includes an increase in the vehicle tax on heavy vehicles with high carbon emissions, a decrease in the cost of electricity for consumers and business, €2 billion to assist car companies with research and development costs on all vehicles, money to assist NGOs in transitioning to electric cars, €2.5 billion to support EV research and development, charging infrastructure, and battery manufacturing, and €1.2 billion to electrify bus and truck fleets. Part of the infrastructure package is a requirement that all gas stations in the country add EV chargers.

This package represents a huge step forward for Germany, and is consistent with its goal of aggressively lowering carbon emissions from its transportation sector. Its commitment may be an inspiration to other nations wrestling with how to support emissions goals despite the economic distress caused by the coronavirus pandemic.