Germany is going to cut EV grants in 2023. According to Dataforce analysis, this will severely delay the ramp-up of e-mobility. In 2024, 360,000 fewer BEVs will be on the road. Please find all the fact on the upcoming changes in this press release.
BEV parc growth is slowing down
There are currently 48.5 million passenger cars on the road in Germany, of which 47.3 million are internal combustion vehicles. For a substantial reduction of CO2 emissions in traffic, these must be replaced by electric cars as soon as possible.
However, the changes to the purchase premium due in 2023 will dampen the growth in the parc. Compared to the last forecast from May 2022, Dataforce expects almost 360,000 fewer electric cars on 1 January 2024.
The threshold of 2 million passenger cars will not be exceeded until 2025. The lower number of BEVs could also reduce investments in the charging infrastructure, as providers must expect lower utilisation.
The main reason for the reduced forecast is the adjustments to the subsidies. These are much more extensive than expected in May. In addition, prices for batteries and electricity are rising sharply. A positive effect is that more of the existing BEVs will be remarketed in the country instead of being sold abroad.
Upcoming changes in 2023:
- From January 1st, grants for newly registered BEV/FCEV passenger cars will be reduced by 2,000 Euros.
- The grant for Plug-In hybrids will be axed completely.
- Starting from September 2023, only private individuals will be eligible for the grant.
- The total budget for the grant will be limited to 2.1 billion Euros.
- The minimum holding time increases from 6 to 12 months.
- The existing price caps will refer to the MSRP of the actual car instead of the base model.
- The price threshold is based on the list price of the model for which the grant is claimed. This means that a vehicle no longer automatically qualifies for the grant if there is a base model of the series within the permitted price range.
Dataforce assessments of the changes:
Raising the minimum holding period is reasonable
The extended minimum holding period will prevent exports of young used cars and thus keep BEV in Germany. Please refer to this article for more information.
MSRP thresholds must be raised, and the subsidy should be coupled to the order date
Orientation to the actual list price is also a sensible simplification. However, it would also be consistent to raise the price limits. Many electric cars have become significantly more expensive this year and will no longer be eligible for subsidies next year, or only to a limited extent.
This is particularly problematic since the subsidy is linked to the date of first registration. For example, a mid-range BEV ordered at the beginning of 2022 could expect a subsidy of 6,000 Euros. If delivery is now postponed to next year and the list price is over 40,000 Euros due to optional equipment, one will only receive half of the expected sum, namely 3,000 euros. This uncertainty will deter potential buyers.
Major cuts for plug-in hybrids
The complete axing of the PHEV grant will dish a severe blow to the fuel type, even though there will remain a lower benefit-in-kind taxation for company cars – at least for now. However, since BEVs provide larger CO2 savings, it makes sense to concentrate the tight budget here.
BEV subsidy cut comes too soon
The Dataforce E-Mobility-Study 2022 shows that there is still a large gap between the price expectations of potential buyers and the actual list prices. As of this year, prices are even continuing to rise, while the cost advantage in operating costs is shrinking. It would be better to cut the rates only when the price difference to internal combustion vehicles has narrowed further.
Exclusion of commercial licences ignores market realities
From January to August 2022, 43 percent of electric cars in Germany were registered in in the name of a company, while in 2021 commercial registrations made up for 50% of the BEV market. Thus, taking away grants for commercial registrations is another painful cut coming on top of existing reductions.
And this does not apply to company cars only. An increasing number of private households opts for car subscription contracts, particularly when it comes to BEVs. And of course, zero-kilometre registrations are also very popular. Technically, both of them are commercial registrations though the car will be destined for the retail channel. Thus, also private buyers will face higher monthly rates.
A “good” example how excluding commercial registrations can affect BEV share is Italy. They have axed purchase premiums for commercially registered passenger cars in January 2022. As a result, new BEV registrations in the particularly popular long-term rental segment have fallen by 21 percent. The market share of electric vehicles is stagnating at a meagre three percent.
Budget limits create uncertainty for buyers
The budget cap also sends a fatal signal. If potential buyers fear that the subsidy budget might be exhausted upon delivery, some will opt for a combustion engine to be on the safe side. It would make more sense to set an overall budget for the next 5 years based on a sales forecast. This would give all parties involved enough lead time to be able to plan ahead.