Germany Subsidizes Electrified Cars – Except Teslas

The German goal of one million electrified cars on the country’s roads by 2020 is unlikely to be met, but the government is doing what it can to bolster EV sales.

The latest step is a subsidy fund of €1.2 billion ($1.4 billion) that will receive 50 percent of its funding from the government.

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Tesla will be excluded from the subsidy for now, however, despite being one of the world’s most well-known automakers in terms of EV production.

There’s a couple reasons for that. The first is that under European Union rules, all EVs produced by European automakers will qualify. Tesla, of course, is American.

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Vehicle price plays a part, too – the current Tesla offerings are priced too high to qualify for the subsidy,
but the upcoming Model 3 will qualify when it goes on sale in Germany.

German politicians have been critical of the subsidy. Since all European-manufactured EVs qualify, that means that even high-end German-produced EVs will be available with the subsidy, cutting a break to well-heeled buyers who don’t need it to purchase a luxury car.

On the other hand, Audi, BMW, Mercedes-Benz, and Porsche have tight EU fuel-consumption regulations to meet by 2021 (57.4 U.S. mpg), and a boost in EV sales could help with that. Especially with $1 billion fines looming for automakers that fail to comply.

One consulting firm estimates that BMW and Audi (and parent Volkswagen), will need to get 25 percent of their European sales to be of “alternative” engines, although it’s unclear if “alternative” means pure EVs or pure EVs and hybrids/plug-in hybrids.

If the government hadn’t offered money towards subsidies, the automakers might have had to do it themselves.

As it is now, automakers are contributing about $680 million to the subsidy fund. Each EV sold will get a rebate of €4,000 ($4,500), while plug-in hybrids get a rebate of €3,000.

The subsidy will exist until it runs out of money, and Germany has also set aside €300 million for boosting the country’s electric-car recharging network, plus another €100 million for government purchases of EVs for fleet use. For a passenger car to qualify for the subsidy, it must be priced under €60,000, or $67,900. That puts the Teslas out of the price range.

There are about 30,000 vehicles on German highways and byways right now, and one analyst estimates the subsidy could boost that number to about 500,000 by 2021.

Manufacturers might use car-sharing systems to bolster that number, because cars that might not appeal to buyers can shuffled off to fleet duty. Those sales still count against the target.

It’s not uncommon for European countries to subsidize EVs, although the programs vary from place to place.