In early 2023, the German Ministry of Economy decided to reduce incentives for the purchase of Battery Electric Vehicles (BEVs) and completely eliminate subsidies for Plug-in Hybrid Electric Vehicles (PHEVs).
As explained by the German Minister of Economy, Robert Habeck, the reason for this decision was that PHEVs are already marketable and do not require public funding.
The incentives gradually decreased throughout the year, until in September, only those using electric cars exclusively for private purposes could apply for the environmental bonus.
Finally, last December, government funding for the purchase of EVs expired for both businesses and individuals.
According to reports, this was due to the exhaustion of all available funds for the 2023 budget year.
All these reductions caused uncertainty in the market, negatively impacting electric vehicle registrations.
In January 2023 alone, the market reacted to the reduction in incentives for PHEVs with a market share of 22.2 percent, compared to 33.2 percent in December 2022.
Pure electric car registrations suffered in the first months and ended the year with a 47.6 percent year-on-year sales decline.
Nevertheless, the annual balance of eVehicle penetration demonstrated an increase of 11.4 percent compared to 2022 and an 18.4 percent market share.
PHEVs, on the other hand, experienced a 51.5 percent drop and a 7.5 percentage point decrease in market share, closing the year with 6.2 percent.
In December 2023, 72,550 new electric cars were registered.
This corresponds to a 58 percent decrease compared to the same month the previous year.
Both PHEVs (-74 percent) and BEVs (-48 percent) were below the 2022 levels.
The change in financing also clearly reflected in overall annual prospects.
According to figures published by the German Association of the Automotive Industry (VDA), a total of 700,200 EVs were registered throughout 2023, 16 percent less than the previous year.
This means that the country did not meet the goal of 1 million electric cars registrations set for 2023.
“The abrupt end of the environmental bonus on December 17 will have an impact on new registrations, especially in 2024,” they argue.
Since 2016, the Federal Office for Economic Affairs and Export Control (BAFA) has received over 2.2 million environmental bonus applications.
Throughout 2023, BAFA recorded environmental bonus applications for 396,584 vehicles.
In December alone (until the 17th, when the bonus was suspended), there were 28,493 new applications.
Many customers ordered electric vehicles believing they would receive government funding and ultimately ended up empty-handed.
How does this impact the German eMobility transition?
This causes a significant loss of confidence among consumers.
According to the Deutsche Automobil Treuhand (DAT) report, 80% of users want to wait for eMobility to develop before showing specific interest in buying it.
To address all this, as a first measure, many German automotive brands tried to mitigate losses by maintaining their own incentives, i.e., reducing their prices.
However, this is temporary, as it is not viable for the industry in the long term.
To reach the German government’s goal of 15 million electric vehicles on the roads by 2030, it is necessary for cars to be affordable.
Undoubtedly, the country still has time to achieve this figure, but industry experts argue that it is still too early to drive this transition without subsidies.
The automotive sector is committed to achieving these ambitious goals as soon as possible.
For this, it is crucial that Germany not only sets goals but also ensures that the necessary conditions are in place to guarantee they can be achieved.
In this context, Andreas Rade, who oversees Industry and Digital Strategies & Basic Policy Issues at the VDA, details in an Electrive podcast the three necessary pillars to advance electric mobility.
“Germany must be attractive as a production location, the price of electricity must decrease, and the pace of charging infrastructure expansion must continue to increase,” he asserts.
At the same time, he emphasizes that if the country does not act quickly, the goal of 15 million EVs by 2030 will not be achieved.