EV subsidies in Germany will be phased out sooner than previously planned, after the government agreed its budget for the coming year. It follows a German high court decision that the EUR60 billion assigned to the Climate and Transformation Fund was unlawful. Consequently, the government has compromised, earmarking EUR45 billion less to the fund that supplies EV subsidies amongst other things.  

Pre-planned Cuts to the Subsidy

Presently, the government subsidy stands at EUR4,500 (USD4,900) for battery electric vehicles (BEV) priced up to EUR40,000 (EUR43,800) and EUR3,000 (USD3,200) for BEVs between EUR40,000 and EUR65,000 (USD71,200). Starting on the 1st of January 2024, the subsidy for vehicles up to EUR45,000 (USD49,300) will be reduced to EUR3,000, and cut for vehicles over the price of EUR45,000. Since September 2023, the subsidy has only been available to private individuals, and follows the phasing out of the PHEV subsidies in January 2023.

In light of the recently agreed budget, the German Economics Minister Robert Habeck commented, “we will phase out the environmental incentives, such as the subsidy for EVs sooner.” Nothing has been confirmed as to when the subsidy will now end.

Climate and Transformation Fund

Cuts to the Climate and Transformation Fund will not only affect EV subsidies. The fund also offers support to the renewables sector, industry decarbonisation and increasing energy efficiency. It’s expected that the announcement will also reduce funding for solar expansion. In the coming year the fund will be cut by EUR12 billion, by 2027 the cuts will amount to EUR45 billion.


In a press release on the 16th of December, the ministry of Economy and Climate said ‘As of December 17, 2023, no new applications for the environmental bonus can be submitted to the Federal Office of Economics and Export Control.’ This puts an immediate end to the subsidy. The statement concluded ‘Since 2016, a total of around 10 billion euros has been paid out as part of the environmental bonus for around 2.1 million electric vehicles.’ (Updated 18/12/2023)

Rho’s Evaluation

Although no details have been confirmed, this announcement comes against a backdrop of an evolving European EV subsidy landscape. Rho Motion Research Analyst, George Whitcombe commented, “Increasingly we are seeing European states tighten their EV subsidies, France recently announced changes to the ‘Bonus écologique’, that reduces EV subsidies and alters the criteria for a vehicle to receive them. Additionally, from January Switzerland will end the four percent vehicle import tax exemption for EVs and Finland plans to end construction subsidies for EV charging infrastructure in its 2024 budget. However, Denmark and Spain both plan to extend their subsidies into next year, past initial deadlines.”

Subsidies are one of the drivers for EV sales, as they are phased out, it can cause short term shifts in EV sale patterns. However, Germany’s electrification is well underway and in the long run we expect the phasing out of subsidies to have a minimal impact on the EV penetration rate.  

Sources: Tagesschau, Clean Energy Wire BMWK