Germany Considers Renewed Support for EVs in 2025 Strategy

Germany's ruling Social Democratic Party (SPD), led by Chancellor Olaf Scholz, is considering reintroducing subsidies for electric vehicles (EVs) as a cornerstone of its economic policies ahead of next year’s elections.

The proposal aims to boost EV sales and strengthen Germany’s position in the growing electric mobility market.

The SPD’s plan, outlined in a strategy document expected to be adopted on Sunday, includes reintroducing purchase grants for battery-powered cars, offering tax cuts for businesses investing in EVs, and setting quotas for electric vehicles among leasing service providers.

The move is intended to counteract the challenges faced by the German automotive industry, which has been struggling with the transition to electric vehicles amidst stiff competition from more affordable Chinese brands such as BYD, combined with weakened demand.

Volkswagen, one of Germany's leading car manufacturers, reported a 12% decline in deliveries of battery-powered vehicles in Europe during the last quarter.

This comes after Germany and several other EU countries rolled back government subsidies for EV buyers, which had previously offset the higher costs of electric vehicles compared to their combustion engine counterparts.

In addition to domestic challenges, German automakers are also seeing weakened sales in China, the world’s largest EV market.

The ongoing real estate crisis in China has reduced spending on luxury goods, and local EV manufacturers hold a competitive edge in the Chinese market. Recently, both BMW and Mercedes-Benz warned that the slowdown in China would negatively impact their profits this year.

To further boost the economy, the SPD is also considering special tax incentives for companies that support the "Made in Germany" agenda, as well as tax cuts for large segments of the middle class. According to the strategy document, the party plans to tie these tax breaks to investments in emerging industries and sectors that safeguard domestic jobs.

The plan proposes lowering income taxes for approximately 95% of taxpayers, while increasing the tax burden on the top 1% of earners.