German carmakers have made major investments in electric vehicles and now the German government is preparing to help sell those new EVs with a new round of incentives.
Earlier this month, Germany rolled out a program that extends its environmental subsidies for electric vehicles until 2025. The incentives had been scheduled to sunset at the end of 2021. But the German government also is considering dropping the incentives for hybrids and plug-in hybrids by the end of 2022.
The program also is expected to include a scrappage scheme for older diesel trucks of which there are many in service on German roads, according to various media reports in the German media.
European carmakers are facing tough new restrictions on emissions of greenhouse gasses. In addition, various cities in Germany have also begun to restrict the use of vehicles equipped with internal combustion engines, particularly diesel engines. Incentives have already helped boost the sales of EVs in Germany, according to Reuters.
Multiple media reports claim the German government is ready to increase incentives for electric vehicle subsidies by 50% between now and 2025.
Fitch Solutions, the analysis division of Fitch Rating Services, estimates the “long-term outlook for EV sales” in Germany is bright. However, the sales of plug-in hybrids are expected to falter and lose market share, according to a new analysis by Fitch.
“We believe that extending the incentives will sustain robust growth in Germany’s EV segment, despite the staged decline in incentives. Furthermore, from 2022 onwards we believe that the market share of hybrid vehicles will drop to a new low as they are excluded from the incentive scheme,” the Fitch report noted.
“Our EV sales forecast methodology places significant weighting in the level of incentives offered for the segment as it is a major driver in EV demand, thus extending the EV incentives to 2025 will have a pronounced impact on our forecast. We have therefore revised up our longer-term (2022-2025) EV sales forecast to growth of 23.2%, up from 19.5% previously,” the Fitch report added.
Fitch analysts also expect plug-in hybrid electric vehicle sales to account for around 25% of total EV sales in 2022, down from our previous forecast of 37.5% of total EV sales.
In the U.S. the incoming administration of President-elect Joe Biden is expected to endorse additional incentives for EVs, perhaps starting with a plan to provide the $7,500 tax credit without quotas by brand, which would be good news for Tesla and General Motors, as well as new investment in the infrastructure of electric vehicle charging.