POLITICO — 2022-12-21
News from Brussels
Germany's electric car dreams are in trouble.
A year ago, Berlin pledged to have 15m battery-installed vehicles by 2030, but it's likely to fall well short of that, according to experts warning that slashed subsidies and production bottlenecks will slow sales.
“Only with a lot of luck will the target be half reached,” warned Ferdinand Dudenhöffer, a professor at the Center for Automotive Research in Duisburg, who's forecasting just 7.2m registrations by the end of the decade.
He based his calculation on the impact of the government’s cut in consumer electric vehicle (EV) subsidies announced this month, but Germany's flagship industry is under pressure on many more fronts.
“The federal government's target for 15m electric cars on Germany's roads by 2030 will be missed by a wide margin,” said Dudenhöffer. “With the new funding guideline for electric cars, high electricity prices and rising battery costs, the market in Germany will collapse in the next few years.”
The EV promise was made by the country’s governing coalition in late 2021, and is a key part of a strategy to clean up road transport while saving the country's dominant car industry from falling behind the competition during the green transition.
The EU's decision to ban sales of new internal combustion engine cars and vans across the bloc from 2035 puts extra pressure on the shift to EVs.
Industry captains have moaned that the sluggish pace of charging infrastructure construction makes it difficult to sell more EVs, but the electric car goal is also running into other hurdles: spiraling inflation, a shortage of critical components, global competition for battery materials and even subsidized EVs ending up in other EU countries.
Rising electricity prices are also undermining the argument that it's cheaper to run a battery-electric vehicle (aka BEV, referring to fully electric vehicles) than a fossil fuel car.
Adding to the headwinds, the government is now paring back subsidies for EV buyers from €6,000 to €4,500 for models cheaper than €40,000 as of January.
In line with the rest of the EU, EV sales are soaring, hitting 355,961 units in 2021, up 83.3 percent on the previous year, according to government statistics. In the first nine months of this year, Germany saw 273,101 sales of battery-electric vehicles, up 15% over the same period in 2021.
But those numbers would need to be drastically raised if the fleet size is going to be anywhere near the government's target in seven years.
“Our optimistic forecast sees the BEV [fleet] being at around 11m in 2030,” said Matthias Schmidt, a Berlin-based auto analyst tracking the market, calling the 15m target a “pipe dream.”
Germany is home to the likes of Mercedes-Benz, Volkswagen and BMW and has a car sector that's responsible for about 5% of GDP and more than 800,000 jobs, but it has form in missing EV targets.
Ex-Chancellor Angela Merkel’s pledge more than a decade ago to have 1m clean cars on the road by 2020 was missed. Of Germany's roughly 50m registered passenger cars, only 1.59m used electricity as of 1 October, with 840,645 completely electric, while the rest were hybrids.
The 2030 target looks even shakier.
In addition to snarled supply chains and inflation-hit consumers, Schmidt also pointed to a leaking market for battery-powered cars. Previous rounds of German subsidies have been used to fund EV purchases that were then exported to other EU countries with less generous support programs.
“In 2022, around a quarter of a million BEVs will have been either exported or scrapped from German roads with lots being siphoned off to their European market neighbors for a profit, courtesy of German tax-funded subsidies,” said Schmidt.
The government moved this month to close that loophole by forcing motorists to hold onto their cars for a year to remain eligible for the subsidies.
Despite the gloom from analysts, the government insists all is fine.
Annika Einhorn, a spokesperson for the economics ministry, which runs the EV subsidy program, said the 2030 target is still in place.
“The federal government is working towards this — be it by promoting the purchase of e-cars via the environmental bonus or by expanding the charging infrastructure,” she said.