Facing the music: Germany and France shift gears on electric car subsidies, leaving EV market in uncertainty

Currently, the German government is finalizing next year's budget, a task proving to be more challenging than expected. Proposed cutbacks notably target the Climate and Transformation Fund. Initially, €160 billion was set to be disbursed by 2027. Now, this sum has been reduced by €12 billion. As a result, Germans considering buying an electric car will be adversely affected.

"Subsidies for buying electric cars and developing solar energy will reduce. The expiration of electric car purchase subsidies will happen sooner than projected," stated Vice Chancellor and Minister of Economy, Robert Habeck, on Wednesday, December 13, as quoted by Deutsche Welle. However, he did not provide a specific date for when these changes will commence. Thus, those seeking assistance from the government to buy electric vehicles are uncertain how much time they have.

On Saturday, December 16, Robert Habeck announced that applications for electric car purchase subsidies can be submitted until December 17. The program which previously offered up to €6 thousand ($7,203) towards purchasing a zero-emission car was abruptly and unexpectedly discontinued. This abrupt change could lead to a significant decline in the popularity of electric cars in Germany, a country already lagging behind in this area.

In November, Volkswagen declared a reduction in the production of electric models in Zwickau due to lower-than-expected interest in electric cars. In September, the company declared that a previously planned electric car factory would not be built. The issue was resolved by altering the production location of some models. This decision might also stem from insufficient demand for electric cars, a hurdle other German brands may encounter.

Subsidy regulations are set to change in France as well. Those models with excessive CO2 emissions will no longer qualify for government support upon purchase. As a result, subsidies will no longer be available for the purchase of the Dacia Spring, Tesla Model 3, and MG4, presently the three most popular electric cars in France.

The new French regulation aims to cease state funding for cars produced in China. However, such a move threatens to disrupt the subsidy system in France, since many electric vehicles manufactured in Europe are too costly to qualify for subsidies under current French regulations.

It seems the meticulously constructed house of cards is beginning to tremble.