The German government has unveiled a €3 billion (approximately $3.5 billion) electric vehicle (EV) subsidy program, open to all automakers, including Chinese brands. This initiative aims to boost EV sales in Europe's largest automotive market. Officially announced this Monday, the subsidy policy is a key component of the government's new round of stimulus measures. Following the termination of a previous subsidy program at the end of 2023, EV demand in Germany experienced a significant decline; this new policy is intended to accelerate the adoption of electric vehicles while providing relief to the struggling automotive industry. Although the policy's intent includes supporting domestic car manufacturers, the German government has not imposed any origin-based entry restrictions.
German Environment Minister Carsten Schneider expressed at a Monday press conference, "I am fully confident in the quality of European and German automotive brands. Whether examining sales figures or their actual visibility on German streets, there is no evidence to suggest the feared large-scale influx of Chinese automakers into the German market is occurring. Precisely for this reason, we have chosen to face competition head-on rather than erect restrictive barriers." This decision is undoubtedly a significant positive for Chinese budget-friendly automotive brands like BYD COMPANY (01211), which are rapidly expanding in the European market. Despite facing EU import tariffs, Chinese EV manufacturers can still achieve profitable sales in Europe, leveraging their low domestic production costs. The European Commission is currently considering replacing the existing import tariff policy with a minimum price mechanism.
Germany's open stance towards Chinese automakers stands in stark contrast to the approaches of other European nations. The UK, the largest European market for Chinese-made EVs, implemented a subsidy policy last year with stringent criteria—including low-carbon emission requirements for battery production and vehicle assembly—that effectively exclude Chinese electric vehicles. France's "social leasing scheme" also contains similar restrictive clauses. According to the German Environment Ministry, this new subsidy plan, initially disclosed as early as last October, is projected to help the market sell approximately 800,000 electric vehicles by 2029. Subsidy amounts will range from €1,500 to €6,000, determined based on the purchasing household's income level, family size, and vehicle type, with the policy primarily targeting low- and middle-income groups.
Automakers like Volkswagen AG (VWAGY) and Stellantis (STLA), which are increasing their focus on affordable electric models, are also set to benefit from this subsidy policy. Germany's EV sales trajectory has been highly volatile: after the previous government canceled subsidies, sales slumped in 2024, only showing signs of recovery in 2025. Although the country has previously repeatedly failed to meet its official EV adoption targets, the market outlook is gradually improving with the upcoming launch of a batch of affordable models priced around €25,000, such as the Renault (RNLSY) R5 E-Tech and the Volkswagen ID. Polo. Furthermore, the ruling coalition led by Chancellor Merz has extended the tax exemption policy for electric vehicles until 2035. The German Finance Ministry estimates that this measure will result in a tax revenue reduction of approximately €600 million for the government by 2029. It is noteworthy that Chancellor Merz has publicly advocated for slowing down the EU's proposed phase-out of internal combustion engine vehicles.
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