The German government is planning new tax incentives from 2024 to revive electric car sales. This move comes after a significant drop in demand following the abrupt end of state subsidies for electric vehicles.
Reviving the electric vehicle market
The German cabinet is set to approve measures on Wednesday, September 4, to bolster the sale of electric cars through enhanced tax incentives for electric company cars. According to a draft law obtained by the German Press Agency, the federal government aims to significantly advance electromobility in Germany. The draft states, “Extensive tax measures are also required for the successful implementation of this goal.”
The demand for electric cars plummeted after the government unexpectedly terminated the so-called environmental bonus in December due to budget constraints. In response, the traffic light coalition agreed on a “growth initiative” in July as part of budget negotiations, which includes tax incentives for electric company cars.
Key measures and their impact
The new measures include:
- A special depreciation for newly registered fully electric and comparable zero-emission vehicles, retroactive to July 1, 2024, for companies.
- An increase in the cap for the gross list price in company car taxation for electric vehicles from 70,000 euros to 95,000 euros.
These incentives are designed to create “significant tax incentives” for the market ramp-up of electromobility in the business sector. The regulation will exclusively cover newly purchased, purely electrically powered vehicles and is set to be introduced for a limited period from July 2024 to December 2028. “The temporary limitation creates incentives for swift investment decisions,” the draft law states.
Economic Minister Robert Habeck (Green Party) has already spoken of a boost to reinvigorate demand for e-mobility, expecting a “demand push.” Company cars play a crucial role in the used car market due to their relatively short holding periods.
Financial implications for the state
The tax revenue reductions are described as minimal for 2024 in the draft law. For 2025, the tax reductions are estimated at 480 million euros, expected to rise to 540 million euros by 2028.
This initiative reflects the government’s commitment to strengthening e-mobility in Germany, aiming to overcome the setback caused by the end of direct subsidies and to maintain the country’s momentum in transitioning to electric vehicles.
