In December 2023, the German federal government decided to prematurely abolish the environmental bonus, aimed at providing state funding for the purchase of electric vehicles (EVs).
In response, a discount battle ensued, making many EVs significantly cheaper.
In almost all cars from the brands that joined this trend, savings of over 5,000 euros can be achieved, as many manufacturers even guarantee compensatory discounts for the subsidy.
The Wolfsburg-based company, Volkswagen, was one of the first to react by significantly reducing its prices, offering discounts of up to 7,000 euros on new orders.
The company supports its electromobility commitment by providing private individuals with a promotional bonus for the ID.
Depending on the model, vehicles are secured up to 5,950 euros, with an additional eMobility bonus of 1,785 euros in some cases.
Together, these result in the Volkswagen environmental bonus.
For example, the basic ID.3 now has a discount of over 7,000 euros and is available for around 33,000 euros.
This makes the car even more affordable than a Tesla Model 3 or Y.
Similarly, the Chinese automaker BYD has implemented price reductions on various models of its zero-emission vehicles to remain competitive in the market.
The price decrease varies by model and variant, ranging from 2,500 to 7,000 euros.
The Dolphin compact is now available from 32,990 euros, representing an 8.3 per cent reduction.
The Atto 3 starts at 37,990 euros, with a 14.9 per cent decrease, and the Seal sedan starts from 44,990 euros, implying a 5.4 per cent decrease.
Meanwhile, Dacia offers an electric bonus of 10,000 euros on all versions of the Spring model.
The offer is also time-limited, valid until March 31.
In late November, Kia Germany guaranteed the payment of the environmental bonus for all private orders placed until December 31, 2023.
After the subsidy removal, the company extended this guarantee until March 31.
For vehicles purchased during the first quarter of this year, dealerships will grant an eBonus of 4,500 euros.
Mercedes-Benz is not lagging behind.
Until January 31, customers continued to receive a direct manufacturer discount of 1,500 euros, in addition to the state compensation of 3,000 euros.
However, from February 1, the policy has been adjusted, and while the manufacturer’s discount still applies, the corresponding state premium financing will no longer be applied.
Simultaneously, Renault offers a reduced environmental bonus of 3,000 euros for the delivery and registration of vehicles between January 1 and March 31.
This offer specifically applies to the Kangoo E-Tech and Twingo E-Tech models.
For the Mégane E-Tech, buyers can benefit from savings of up to 6,700 euros.
Meanwhile, Stellantis guarantees the reduced bonus benefit for eligible cars, for existing orders from registered private customers until February 29.
This applies to EVs with a base model net catalog price of up to 45,000 euros, amounting to 3,000 euros.
Notably, those purchasing an immediately available Fiat 500e from a participating dealer can enjoy a discount of 5,000 euros instead of 3,000 euros until March 31.
Tesla also continues its discounts.
The Model Y now costs 5,000 euros less in the Long Range and Performance variants, with prices dropping to 49,990 and 55,990 euros, respectively.
The basic rear-wheel-drive version now costs 42,990 euros, corresponding to a discount of 1,900 euros.
According to statements from Deutsche Automobil Treuhand (DAT) to Mobility Portal Europe, the price reduction in the German market is not generating the sales boost expected.
Contrarily, uncertainty and constant changes in the sector are creating skepticism among buyers.
“80 per cent of private car owners prefer to wait and keep their cars to see what will happen with electric vehicles,” say Martin Endlein, Head of Corporate Communications, and Martin Weiss, Head of Valuations.
Additionally, there is speculation that manufacturers’ price reductions could lead to a further decrease if subsidies are reintroduced, making cars even more affordable.
As a result, experts warn: “The increase in eCar adoption is really in danger this year, so we don’t see a real acceleration in sales.”
Undoubtedly, the current price war in Germany is partly attributed to the removal of the environmental bonus.
However, is this exclusively the reason manufacturers have reduced their prices?
Not only has Tesla adjusted its prices during 2023, intensifying competitiveness in the electric vehicle market, but Chinese manufacturers entering the German market are also following this trend.
MG, for example, has emerged as one of Volkswagen’s main competitors, offering the MG4 at a price approximately 4,000 euros lower than its German counterpart, the VW ID.3.
At the end of 2023, Volkswagen recorded 22,270 registrations, 9,000 units more than the Chinese brand, which reached 13,263 sales.
Paradoxically, the Asian country is one of the largest sales markets for VW.
According to Oliver Blume, the German manager and CEO of the Volkswagen Group, the ID.3 model is becoming a “bestseller” in that market.
As part of its “In China, for China” strategy, VW significantly reduced the base price of the ID.3 model by 16%, bringing it to 15,230 euros.
The price of the ID.4 also dropped by the equivalent of 18,500 euros.
Thanks to these measures, VW received over 10,000 orders for the ID.3 in just one month.
This strategy could instill hope for the German manufacturer, which faced workforce reductions in several of its plants during 2023 so far.
However, this growth is not exclusive to Volkswagen.
Other local brands like Mercedes, BMW, VW, and Co. experienced a 49 per cent increase in electric vehicle sales in China in 2023 compared to the previous year, according to a PwC study.
Despite this, Stellantis CEO Carlos Tavares warns that the price war and aggressive discounts in the eMobility market could trigger a “race that will end in a bloodbath.”
