German Government Raises Subsidy Levels for EVs

The German government will raise the level of subsidies for purchases of electric vehicles (EVs) and increase taxes for cars with higher CO2 emissions, as part of a broad stimulus package to help revive the economy.

The subsidy for EVs will increase to €6,000 from €3,000, for vehicles costing up to €40,000, until 31 January 2021. In support of this, the government will spend an additional €2.5bn on the expansion of modern, publicly-accessible charging infrastructure, the promotion of research and development including in modernising the commercial fleet, and battery cell production.

The tax on passenger cars will be more strongly oriented towards CO2-emissions, to better support the purchase of lower-emission or zero-emission vehicles. For new registrations the assessment basis as of 1 January 2021 will be mainly related to CO2-emissions per km, and will be raised in stages above 95g CO2/km. In addition, the existing 10-year motor vehicle tax exemption for purely electric vehicles will be extended until 31 December 2030.

The stimulus package, which is designed to counter the negative economic effects of the Covid-19 pandemic, could alter road fuel demand in Germany. But this would be noticeable only on the long run. Electric passenger cars accounted for just 0.3pc of the fleet at the start of this year, although the number of new EV registrations is rising. In May, 5,578 new EVs were registered in Germany, more than 20pc as many as a year earlier. New registrations of gasoline and diesel fuelled cars fell by 56pc and 52pc over the same period.

The government's decision to cut value-added tax (VAT), from 19pc to 16pc from July until the end of the year, could support demand for road fuel and heating oil ahead of likely price increases from next year, when a carbon emissions price will be introduced in the transport and heating sectors.