The electric vehicle (EV) market in Europe is currently going through a dreadful crisis. A purchase subsidy that recently had lifted hopes in Germany disappeared with a court ruling. This, coupled with other decisions, has contributed to a significant slowdown of EV registrations across the continent. Germany and France have thereby been hit the worst during 2024.
Germany had been offering purchase subsidies to incentivize the public to adopt electric vehicles. The Karlsruhe Court’s ruling effectively means that unused COVID-19 funds can’t be reallocated to electrification projects. This needs to be confirmed by a parliamentary vote, which would provide room for an exception to the EU’s debt brake rule. Consequently, all the financial backing that spurred consumers to purchase electric vehicles in Germany has disappeared.
The cuts in Germany’s subsidies are complicating life for EV makers. On top of this, a new European preference rule has compounded the hurdles they must clear. This regulation has raised the cost of producing vehicles, including those imported from China. Consequently, these conditions were responsible for a significant recession in the share of EVs out of all new car sales. This was a trend that continued through all of 2024.
From the German perspective, the situation across the Rhine in France is not too different. As late as December 2023, the news broke of lowered fiscal expectations for EV rollout. As a consequence, France has seen a drop in registrations. The country previously relied on purchase subsidies to artificially inflate EV sales numbers. Recently, it has turned its attention to energy efficiency certificates paid for by the energy companies. Though these certificates do incentivize the shift to electric vehicles, they just shift that cost onto the consumers of energy. The effect on inflation is still very small, with inflation in France at about 1% right now.
These hurdles notwithstanding, there is a clear renewed appetite among European consumers for electric vehicles. Electricity prices in France have started to decline, taking some inflationary pressure off consumers’ wallets. This rapid decline is sure to generate more excitement than ever around electric vehicles (EVs). When faced with the promise of energy efficiency certificates, research shows, are highly effective at changing consumer behavior. They may be instrumental in increasing electric vehicle sales across the board in France.