SPD will exclude luxury cars from electric vehicle subsidies
About three months after the launch of the new electric vehicle subsidy program, calls are growing for revisions to the guidelines. New players in the debate include the SPD and the Greens, who want to exclude luxury cars from the subsidies. A “Made in Europe” clause and support for used electric vehicles could also be introduced.
Shortly after the Federal Agency for Economic Affairs and Export Control (BAFA), responsible for processing subsidy applications, released its first monthly statistics on such applications, discussions about revising the electric vehicle subsidy program launched on May 19th have intensified.
The current issue: Among the 26,875 subsidy applications approved by BAFA by the deadline of August 1, there were also more than 50 luxury vehicles. These included 36 Porsches, Mercedes-Benz’s electric luxury models G 580 and EQS 450+, as well as BMW’s top-tier models XM 50e and i7. This was first reported by the “Handelsblatt.”
SPD members of the Bundestag are now using this as an opportunity to call for luxury models to be excluded from electric vehicle subsidies. “The subsidies must meet their social obligations,” said Isabel Cademartori, the SPD faction’s spokesperson on transport policy, to the “Handelsblatt.” Sebastian Roloff, the SPD faction’s spokesperson on economic policy, agreed: “Luxury cars should not be subsidized by the state.”
Income threshold of 90,000 euros
Unlike the previous electric vehicle subsidy program that expired at the end of 2023, the responsible Federal Ministry for the Environment has this time not set a price ceiling for the vehicles in the subsidy guidelines. Instead, the subsidization (or lack thereof) of luxury cars is intended to be regulated indirectly by ensuring that only households with low and middle incomes are included in the subsidy program. The threshold for taxable annual income is 80,000 euros for households without children and 90,000 euros for those with two or more children. Given deductions for various items such as business expenses, insurance costs, or extraordinary burdens, these limits can in many cases still be met by households with a gross income of around 120,000 euros.
However, according to the “Handelsblatt,” it is likely not only the lack of a strict price limit that contributes to electric vehicle subsidies being used in extreme cases for luxury electric cars. It is also the fact that, per current subsidy guidelines, the vehicle owner and purchaser do not necessarily have to be the same person. The newspaper reports that users on online forums are already discussing registering vehicles under parents or other family members with lower incomes.
Green parties also want to lower the income threshold
The Greens have also voiced support for the SPD’s demand: “If the subsidy can be used even for the most expensive luxury models, and buyers and owners don’t even have to be the same person, it’s practically an invitation to high earners,” said Swantje Michaelsen, a Greens transport policy expert. In addition to calling for a ceiling on list prices, Michaelsen proposes lowering the income threshold from the current maximum of 90,000 euros, so that subsidies are directed more toward people in lower income groups. According to the Federal Environment Ministry, about a quarter of applications so far came from the highest eligible group with incomes between 60,001 and 90,000 euros.
The Federal Environment Ministry, headed by Carsten Schneider (SPD), currently sees no need for action: Subsidies for expensive vehicles are merely a “very minor issue,” said a ministry spokesperson to the “Handelsblatt.” Overall, however, more than 80 percent of subsidized vehicles cost less than 50,000 euros.
In addition, introducing a price cap would bring new administrative challenges to BAFA: The relevant price for each model or even individual vehicle would have to be determined based on its specifications, and the data would need to be updated continuously.
Will “Made in Europe” rules and used car subsidies arrive soon?
The SPD and Greens' call for adjustments to electric vehicle subsidies is part of a series of earlier proposals to change the program funded at 3 billion euros. One such proposal is the introduction of a “Made in Europe” rule to exclude vehicles manufactured, for example, in China, a cause supported by politicians from both the Union and SPD. Another idea is to offer purchase incentives for used electric vehicles as well. Mandy Pastohr, president of BAFA, considers this sensible, but the federal government must make the final decision.
Meanwhile, the new Federal Transport Minister Steffen Bilger (CDU) said during a company visit to Neumünster that he sees no need for another purchase subsidy after the end of the electric car incentives, which are expected to expire in 2029. “The incentives are being widely used,” said Bilger. “For the future, I don’t think further support for electric cars is necessary.” Electric cars are well-developed and now also cost-effective. Many factors already favor electric cars, especially given high fuel prices.