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How Long Can Tax Incentives Support The EV Market?

In many places around the world, it's not looking great.

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Iulian Dnistran Iulian Dnistran

By: Iulian Dnistran

Dec 19, 2023 at 2:00pm ET

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Germany, the country that’s home to several car manufacturers and the famous no-speed-limit Autobahn, will prematurely end its subsidy scheme for people who want to buy a new electric car.

The program, which offered €6,750 or roughly $7,400 for anyone who bought a new battery electric vehicle (BEV) or fuel cell electric vehicle (FCEV) with a price tag under €40,000 ($43,900) was supposed to last until the end of 2023 and continue in one form or another in 2024, but that won’t happen anymore.

According to the German publication Handelsblatt, the country that’s home to BMW, Porsche, Volkswagen, and more, decided to put the brakes on any form of EV-buying subsidy basically overnight. But this is just one case where a government decided to just throw incentives out the window.

Earlier this month, Romania, another member of the European Union, proposed to cut what was one of the biggest bonuses in the EU when buying an EV–€11,000 or $12,000–to just €2,000 starting next year. The Environment Ministry later changed its mind after backlash from the public and proposed a bonus of €5,000 from next year.

France and Spain will also modify their support schemes in one way or another from 2024, either by slashing the cash bonus or by taking aim at cheap, Chinese-made EVs that are supposedly manufactured with help from coal power.

The United States is in a similar situation, with the federal tax incentive going through several modifications that will affect EVs powered by batteries made with materials from so-called “foreign entities of concern” (FEOC), including China, Iran, and Russia.

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But all these changes mean prospective buyers looking to get behind the wheel of a new electric car will likely end up getting a combustion car instead simply because affordable EVs are still nonexistent, at least in Europe and the United States.

China has its fair share of cheap, small urban runabouts, but Westerners are just getting the hang of it and the first sub-$20,000 EVs to be made on EU or U.S. soil are still a long way away.

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People want affordable cars and the industry needs profit margins but it looks like governments around the world are getting fed up with subsidizing expensive electric cars. And until manufacturers can get their act together and give people what they want, we might see EV adoption rates go down, which is anything but great.

As always, we’d like to hear from you, so head over to the comments section below to give us your thoughts on this whole incentives deal.

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