Sales fall after subsidies end even in the Vatican of climate-change faith.
Carbon neutrality is something of a religion in Germany, but faith apparently has its limits. Witness the unfolding drop-off in sales of electric vehicles as Berlin withdraws costly subsidies.
Sales of fully electric vehicles (EVs) fell 13.2% in January compared to January 2022, Germany’s Motor Transport Authority reports. Sales of hybrids declined 6.2%. This compares to an increase of 3.5% in the number of new gasoline-powered cars sold, and a modest decline of 1.2% for diesel.
The main explanation is the end of Berlin’s subsidies for EVs and hybrids at the new year. Until December the subsidy had offered up to €9,000 split between consumer and producer for EVs with a net list price below €40,000. Hybrids in that price range received €6,750. Berlin has ditched the subsidy for hybrids entirely and cut the payout to €4,500 for EVs below €40,000. Further cuts to the subsidy level and eligibility are scheduled over the next year.
In reducing subsidies, Berlin made the sensible point that increasing adoption of EVs and hybrids signaled consumers are embracing the cars and the more mature market no longer requires taxpayer support. Yet subsidies still seem to make a big difference. One reason for January’s sharp decline in sales is that EV and hybrid purchases boomed at the end of last year as car buyers scrambled to cash in on the subsidies while they still were available.
Auto makers aren’t optimistic that demand will bounce back this year. The Association of the Automobile Industry estimates that total sales of EVs and hybrids will fall 8% this year compared to 2022, with the decline concentrated among hybrids (sales expected to fall 20%) that no longer receive taxpayer support.
This year will thus be a market test for electric vehicle demand in the Vatican of climate-change belief. Politicians in the West have used subsidies and mandates to drive EV sales, no matter that they aren’t as green as their advertising. The cars are only as carbon-friendly to operate as the power grids they refuel from, and Berlin’s refusal to embrace nuclear power means Germany is burning more coal to cover for the end of natural-gas imports from Russia. Then there’s the environmental cost of mining for all that cobalt, copper and lithium for EVs and their batteries.
If consumers want to buy EVs, go for it. But what does it say about their appeal if people need subsidies to buy them?