Germany will continue exempting electric vehicles from motor-vehicle taxes until 2035, a move the government says is essential to sustain momentum in its shift toward cleaner transport. Federal Finance Minister Lars Klingbeil confirmed the draft legislation this week, ending months of uncertainty surrounding the program after repeated warnings that tight public finances could curtail it.
Under the plan, the exemption will apply to battery-only vehicles first registered by Dec. 31 2030. Under existing law, new electric-car registrations after Jan. 1, 2026 would have lost the benefit, prompting calls from industry leaders to act quickly.
The new extension forms part of a package of measures intended to steady Germany’s auto sector and preserve competitiveness against international rivals. Klingbeil said the aim is to advance electric mobility in Germany by using the ‘right incentives’. The Finance Ministry projects the change will reduce federal revenue by several hundred million euros.
The decision adds to two previously approved steps in the government’s investment package: raising the price ceiling for EV tax incentives to $116,634 and allowing special depreciation rules for battery-powered vehicles. Over the summer, officials had hinted the tax measure might be delayed or cancelled because of fiscal pressure, noting that all coalition pledges remained contingent on available funding.
Klingbeil’s announcement comes just ahead of a high-level automotive dialogue at the Chancellery, where Chancellor Friedrich Merz will meet federal and state representatives, industry executives, and labor unions. The meeting’s agenda extends beyond domestic incentives to global issues such as Chinese electric-vehicle competition and ongoing tariff disputes with the United States.
Klingbeil emphasized that Germany needs to put together a comprehensive plan to steer its auto industry through upcoming transitions while safeguarding employment. He stressed that maintaining Germany’s reputation for producing world-class vehicles remains essential and acknowledged that the nation’s automotive future will be defined by electrification.
The summit is also expected to revisit a subsidized leasing scheme for low- and middle-income households, modeled partly on a similar initiative in France. Coalition parties had promised the program last year but have offered few details on eligibility or rollout timelines.
German automakers face intensifying competition from Chinese producers whose lower-cost, high-quality EVs are capturing global market share, while U.S. trade policies have added new complexities. Extending the tax exemption underscores Berlin’s commitment to maintaining domestic EV uptake despite fiscal challenges, signaling that sustained financial support is critical to keeping traditional carmakers competitive against faster-moving international challengers.
The approach adopted by Germany to support vehicle electrification ties in with the country’s shift to renewable energy. North American companies like PowerBank Corporation (NASDAQ: SUUN) (Cboe CA: SUNN) (FRA: 103) could be thinking that the U.S. federal government lost an opportunity to be a global leader by reversing the policies that had previously been enacted to accelerate the shift to cleaner forms of energy.
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