Sales of electric cars are collapsing, Germany is taking action: incentives are back

Sales of electric cars are collapsing, Germany is taking action: incentives are back

German Chancellor Olaf Scholz announced the reintroduction of bonuses for the purchase of electric vehicles, a measure abandoned at the end of 2023 after the Constitutional Court imposed a crackdown on government public spending in the name of austerity.

The about-face

This decision was presented by the German leadership as a strategic attempt to stimulate the ecological transition and support the domestic automotive industry, in a context in which the electric vehicle market suffered a sharp slowdown after the elimination of incentives.

The chancellery’s move is part of the strategy agreed by Scholz’s Social Democratic Party (SPD) ahead of the federal elections in September 2025. The maneuver also includes tax breaks for foreign investments and support for domestic industry through the so-called “Made in Germany”, intended to encourage production in the country and attract foreign capital.

The policy document also suggests raising the minimum wage, cutting taxes for 95% of Germans and introduce reduced network tariffs for energy-intensive industries such as chemicals or glass.

The incentive for electric cars

The bonus program, previously known as Umweltbonuswas introduced to encourage the purchase of electric and hybrid vehicles pluginsfavoring the reduction of polluting emissions.

However, in October 2023, the government decided to phase it out due to high costs and concerns regarding excessive support for hybrid vehicles pluginsdeemed not green enough to justify the incentives. Furthermore, the government had shifted attention towards policies more oriented towards the direct reduction of emissions and the promotion of renewable energy, targeting sectors other than the automotive sector.

The resulting drop in sales has raised concerns among manufacturers and workers in the auto industry, a mainstay of the German economy, and prompted the government to reevaluate its stance.

The electoral run-up

The proposal comes at a delicate moment for Scholz, whose government is increasingly criticized for its management of the energy transition and industrial policies. The polls see the SPD behind not only the Christian Democrats of the CDU, but also the far-right party AfD. Despite the uncertain situation, Lars Klingbeil, the co-president of the SPD, underlined that the party still believes in a possible electoral comeback, and that to do so it is necessary to focus on policies in favor of the “working middle class”.