The German federal government has approved a new project to relaunch its electric vehicle subsidy program. Set to take effect next year, this revamped program aims to breathe new life into Germany’s struggling electric car market.
The German government plans to allocate 585 million euros to subsidize electric vehicle purchases in a significant policy shift. This corrective measure comes with a clear goal: to stimulate the auto industry following the abrupt halt of the previous subsidy system in December last year. That unexpected decision sent shockwaves through the German economy, resulting in a staggering 70% drop in electric vehicle sales within a few months.
Proposed by the Ministry of Finance and approved by the government, the new scheme will offer subsidies over the next three years. It targets companies purchasing electric vehicles, allowing them to benefit from tax reductions of up to 40% in the first year after purchase, gradually decreasing to 6% over the following five years. Details regarding subsidies for individual buyers have not yet been announced.
One notable change in the new program is the increase in the maximum price of an eligible electric vehicle to 95,000 euros, up from the previous limit of 70,000 euros set in the 2023 program.
German Economy Minister Robert Habeck affirmed on Tuesday that the government will continue to support the auto industry and assist in its transition to electrification. This announcement comes amid tensions within Volkswagen regarding potential restructuring and even factory closures due to the declining auto market.
The need for intervention has become increasingly apparent as electric vehicle sales in Germany continued to plummet in August, contributing to a massive 27.8% decline in the country’s overall auto market. Electric brands have been hit particularly hard, with Tesla experiencing a 65.7% drop in sales compared to 2023, and Volkswagen seeing a 23.3% decline. Other major German automakers, BMW and Mercedes also reported significant decreases of 23% and 15% respectively.
For now, Germany grapples with these challenges, so the reintroduction of the subsidy program represents a crucial step in the government’s efforts to revitalize its automotive sector and maintain its position as a leader in the global transition to electric mobility.
