The electric vehicle (EV) landscape is facing another seismic shift as Germany abruptly ends its EV subsidy program. This unexpected move by the German coalition government, facing a budget crisis, is sending shockwaves through the automotive industry, affecting major players like Tesla, Volkswagen, BMW, and Stellantis.
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Swift Conclusion to “Environmental Bonus” Impacts Tesla
The German government’s decision to conclude the “environmental bonus” program, originally slated to end on December 31, is now effective immediately. The requirement for vehicle registration before delivery means that the EV subsidy effectively ceases to exist.
This sudden halt to Germany’s EV subsidy, which could go up to 4,500 euros, deals a significant blow to automakers relying on these incentives. Tesla, Volkswagen, BMW, and Stellantis, among others, will now need to reassess their strategies in the German market.
Effect on Tesla’s Operations
Initially, the plan was for a reduced subsidy of 3,000 euros in 2024. However, the recent decision to end the program two weeks early catches many buyers in the midst of a last-minute purchasing frenzy. Tesla, in response to the imminent subsidy expiration, offered attractive deals to German buyers. These include 0.99% loans for those who ordered by December 18 and took delivery by December 31. With the subsidy program ending prematurely, many buyers may miss out on the promised 4,500-euro incentive.
Additionally, Tesla’s Berlin-area plant is set to shut down production from December 22 to January 2, 2024, compounding challenges for the company. Germany’s decision follows a broader trend in Europe, with France implementing stricter restrictions on EV subsidies as of December 15. Subsidies, up to 7,000 euros, are now limited to electric cars manufactured in Europe. However, Chinese-made vehicles like the Tesla Model 3 are excluded.
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Giga Berlin hits 5k builds/week—1 year after delivering the first vehicles to customers pic.twitter.com/PZigSaSci5
— Tesla (@Tesla) March 25, 2023
Notably, earlier this year, GigaBerlin expanded its weekly capacity to 5,000 units as a part of the carmaker’s aggressive expansion plans in the market.
What We Think
With Germany and France being Tesla’s two largest markets in Europe, these subsidy changes pose considerable challenges. As the industry navigates this evolving landscape, automakers will need to adapt their strategies to thrive in a subsidy-reduced environment. Stay tuned for updates on how major players, including Tesla, respond to this sudden shift.
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