Germany To Reduce Electric Car Subsidies Starting Next Year

In a major move, Germany’s Economy Ministry has announced that the government will reduce the subsidies or financial incentives on the purchase of electric cars from next year. This is a result of an agreement reached between the coalition partners. It is being said that rising adoption of EVs has already made the government subsidies unnecessary.

The dispute had been long pending between the Free Democratic-led Finance Ministry and the Green Party. Economy Minister Robert Habeck said, “E-vehicles are becoming more and more popular and will no longer need government subsidies in the foreseeable future.”

According to reports, the incentives to the purchasers of electric cars will end completely once the EUR 3.4 billion are spent that are allocated from the coming two years of budget. As per the scheme, subsidies for EVs priced under EUR 40,000 will be EUR 4,500 at the beginning of next year from EUR 6,000 currently, and drop to EUR 3,000 in the following year. Electric cars costing over EUR 40,000 will attract a premium of just EUR 3,000 at the beginning of the next year instead of EUR 5,000 at present. Electric cars priced over EUR 65,000 will attract no subsidy.

The government has clarified that only private electric cars will avail the system of subsidies and no such scheme will be in place for company cars. By the end of 2022, incentives on plug-in hybrid cars will also go away. The government had previously revealed doubts over the climate credentials of the double-engine vehicles. These vehicles are heavy and their battery is good only for short travels.

The Minister said, “For the forthcoming funding phase, we are placing a clear focus on climate protection and are concentrating funding on purely battery-electric vehicles.”

The EV Market Of Germany And Criticism Of The Agreement

The electric cars sales in Germany has doubled to 328,000 in 2021 as against sales in 2020. Today there are over 600,000 electric vehicles in Germany. About 14 per cent of the new registrations of cars in Germany are completely electric.

Auto association body VDA has openly criticised the government decision of pulling back the proposed subsidy on electric cars. VDA President Hildegard Mueller has said, “In times of rising costs and burdens, the decision to unilaterally and comprehensively cut funding is incomprehensible.”