The new electric vehicle (EV) incentive introduced by the German government aimed to boost local manufacturers. However, it appears that international companies, such as Tesla and other foreign brands, are reaping the most benefits from this scheme. Recent data from the Federal Ministry of the Environment reveals that 2,086 Tesla vehicles received subsidies, while VW could only manage 593 subsidies. This puts Volkswagen on par with Chinese manufacturers like Leapmotor (613) and BYD (544). BMW and Mercedes have also fared poorly, with only 451 and no vehicles subsidized, respectively. According to automotive expert Frank Schwope, this outcome is alarming. He argues that the new incentive bolsters foreign competition while easing the entry of Chinese manufacturers into the German market.
Government Lags Behind EV Goals
Since May, car buyers have been eligible to apply for this new incentive, retroactively applicable for purchases made from January 1, 2026. The scheme targets individuals with an annual taxable income of up to €80,000, offering between €3,000 and €5,000 depending on income brackets. The government has allocated a total of €3 billion from the federal budget through to 2029 for this purpose.
The incentive was designed to revive the sagging sales of EVs, which had noticeably decreased following the prior coalition’s halt on subsidies by the end of 2024. Germany is still far from the politically targeted goal of 15 million EVs by 2030, with only about two million currently on the roads. Only 4.1% of around 61 million registered vehicles are fully electric, as per data from the Kraftfahrt-Bundesamt (KBA).
However, the results thus far have been disappointing. The Ministry has reported that only €53.9 million have been disbursed, amounting to just 1.8% of the allocated funds. In the initial weeks of the incentive, the bulk of the benefits has gone to foreign manufacturers. Among the 14 most subsidized brands, only two are German. A total of 2,504 vehicles from US manufacturers have been subsidized, while German brands accounted for only 1,451 subsidies.
Critics of the Incentive Policy
This outcome has not surprised many experts, including Ferdinand Dudenhöffer, founder of the Center Automotive Research in Bochum. He notes that the structure of the incentive favors cheaper vehicles tied to the income limit of €80,000. As a result, customers with moderate incomes are less likely to purchase luxury brands like Mercedes or Porsche. Hence, the policy has inadvertently provided a “Christmas gift” to foreign brands like BYD.
Dudenhöffer argues that the program is fundamentally flawed. EVs are selling increasingly well without government subsidies due to falling prices. Moreover, some manufacturers have raised prices since the incentive was introduced, resulting in mere “windfall effects” rather than genuine growth in sales. His conclusion is stark: “It’s time to stop such initiatives.”
Evaluating the Incentive Data
According to Wulf Schlachter, the incentive primarily amplifies trends that were already observable before its introduction. Those manufacturers with strong private customer offerings will benefit further from the scheme. Price points, vehicle availability, and aggressive leasing offers all play significant roles.
However, experts caution against overinterpreting the subsidy figures. Schlachter asserts that the current statistics represent merely a snapshot, not a conclusive indicator of the long-term competitiveness of the German auto industry. Ultimately, success will hinge on whether German manufacturers expand their offerings in the volume-heavy entry and mid-range segments.
The recent interim assessment shows that significant challenges remain in integrating climate and industrial policies through a single purchase incentive. As the numbers evolve, the true impact of this funding will become clearer, but for now, German manufacturers face an uphill battle in regaining their competitive edge in the EV market.
