Germany's EV sector rocked by earlier-than-expected subsidy cut

Germany's BEV customer subsidy regime has come to an abrupt end after a ruling by the nation's high court forced the government to pass a revised and tightened budget for 2024.

The court ruled last month that the government had broken a constitutional debt rule by transferring funds earmarked for pandemic support to its Climate and Transformation Fund (CTF).

The court ruling meant that €60bn ($65bn) had to be withdrawn from the CTF, forcing the "environmental bonus" programme to come to an end.

"As part of the negotiations on the Climate and Transformation Fund, it was decided on 13 December 2023 to end support through the environmental bonus as soon as possible," says the federal ministry for economic affairs and climate action.

The fund has paid out €10bn in subsidies for c.2.1mn EVs since 2016. It offered up to €4,500 per consumer to help cover the costs of buying a BEV.

The scheme had originally been due to run until the end of 2024. Subsidies already applied for will be paid out but no new applicants will be accepted from today.

Restriction to subsidies available for BEVs have already caused crashes in buying uptake in January and September this year. But, as these were expected, they were preceded by big gains in volumes sold in December 2022 and August this year.

As these changes have been made unilaterally, December will not have the chance to benefit from any pre-subsidy-end spike. But, while the changes are likely to dampen BEV buyer appetite in January, the trough could be less pronounced owing to the lack of this accelerated buying.

Germany plans to get 15mn electric cars on the road by 2030. Corporate monthly benefit-in-kind fiscal benefits for BEVs remain in place and could even widen over an ICE, notes Matthias Schmidt, European market analyst at consultancy Schmidt Automotive Research.

But there are still fears for firms trying to sell BEVs into the German market, particularly the country's domestic titans BMW, Mercedes and VW. “The German auto industry is now very handicapped,” says Ferdinand Dudenhoeffer, director at Germany’s Center for Automotive Research, speaking to German media organisation De Welt.

“This will mean that German car manufacturers will not be able to ramp up production and achieve the economies of scale and cost reductions that Chinese auto manufacturers are achieving.”