Two years after abruptly ending the EV subsidies due to budget constraints, Germany is returning the incentives for buying electric vehicles with federal funds of $3.5 billion (3 billion euros) by 2029.
With the return of the incentives, Germany plans to prop up its ailing automotive sector, which has suffered a lot in recent years from surging costs, supply chain issues, and Chinese competition in EV sales.
The end of the previous EV subsidy scheme in Germany at the end of 2023 under the previous government resulted in a plunge in German EV sales the following year.
Now the government of Chancellor Friedrich Merz has approved a new scheme in effect from January 1, 2026.
Under the new scheme, the German government will pay an EV buyer between $1,740 (1,500 euros) and $7,000 (6,000 euros), depending on the model of the vehicle and the household’s earnings and size, Germany’s Environment Minister Carsten Schneider told the Bild newspaper on Friday.
The total funds of $3.5 billion would be sufficient for Germany to subsidize the sales of about 800,000 electric vehicles over the next three to four years, the minister added.
Regarding concerns about Chinese competition, Schneider told Bild that in 2025 about 80% of the new registered electric vehicles and plug-in hybrids in Germany were made in Europe.
At the end of last year, Germany was the leader of the EU member states pushing for the European Union to soften its de facto ban on new gasoline and diesel passenger cars from 2035. The lobbying from Germany and Italy, and the auto industry, resulted in the European Commission proposing the easing of the de facto ban on new sales of combustion-engine cars from 2035.
The new regulations will allow for plug-in hybrids (PHEV), range extenders, mild hybrids, and internal combustion engine vehicles to still play a role beyond 2035, in addition to full EVs and hydrogen vehicles.
By Tsvetana Paraskova for Oilprice.com
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