German Chancellor says EU readying EV buying incentives

The European Union is preparing bloc-wide purchase incentives for electric vehicles as a way of supporting the EU’s struggling carmakers.

The plan was announced by German Chancellor, Olaf Scholz, during a speech at the World Economic Forum, just days after figures revealed car sales, particularly EVs, fell in Europe last year.

Data from industry body the ACEA showed that EV sales across the region dropped in 2024 and took 1% less market share in 2024, but some countries, including Germany saw far sharper reductions.

In response to a growing number of global challenges such as the return of Donald Trump to the US Presidency and the war in Ukraine, Scholz called for an economically strong Europe with less bureaucracy and more competitive industry.

“E-mobility is the future, there is no doubt about that,” he said. “Anyone who suggests otherwise is damaging our industry. I am delighted that the President of the Commission has now taken up my proposal for harmonised Europe-wide purchase premiums for e-cars.”

In Germany, Schultz’s centre-left Social Democrat party has outlined a “temporary tax reduction” to promote the purchase of EVs in Germany ahead of snap elections in February 2025. In 2023, Germany axed subsidies for EVs, a move which has been blamed for harming EV demand. In 2024, its EV sales fell 18% compared with the previous year.

Any EU incentives would not apply in the UK, which scrapped its own Plug-in Car Grant in 2022. However, the body which represents car makers in the UK has repeatedly called for new incentives to help stimulate private growth.

In the years following the PiCG phase-out, car manufacturers have sought to increase EV sales across the UK by offering a series of financial incentives including significant discounts on vehicles.

The Society of Motor Manufacturers and Traders (SMMT) reported that manufacturers offered average discounts of nearly £12,000 per electric vehicle to comply with the UK government’s Zero-Emission Vehicle (ZEV) mandate, which came into effect in January last year. It branded such discounts as unsustainable and urged the government to support new measures, including a temporary 50% reduction in VAT on new EVs.

The discounts, and favourable company car tax rates, do appear to have had a positive effect on the UK, where EV sales were up more than 20% in 2024.

At the end of last year, the UK emerged as Europe’s largest EV market, marginally overtaking Germany which saw 381,000 units sold after the subsidy changes and strategic delays within the country.

In the UK, a total of 381,970 EVs were sold, representing a 21.4% year-on-year jump over 2023.