Subsidies Make Some Electric Vehicles Nearly Free in Germany

With most developed countries looking to a carbon emission-free future, electric vehicles (“EVs”) have emerged as the next phase of vehicular travel. Powered by clean, renewable energy and with zero emissions, and cheaper to run and maintain in the long run compared to traditional vehicles, electric cars play a huge role in reducing how much carbon is produced on our roads. However, the initial purchase price of most EV models prevents a large chunk of the population from going green.

To combat this barrier to widespread EV adoption, several governments have created subsidy programs to make electric vehicles more affordable. If you are a prospective car buyer in Europe, especially Germany, you will be happy to know about national government subsidies so generous that you can get your hands on an electric vehicle for free. According to BloombergNEF, Germany and France’s purchase subsidies are now among the most favorable in the world, with shoppers swarming virtual showrooms in the two countries for the now affordable EVs.

In Germany, the government subsidies have allowed Autohaus Koenig, a dealership chain with more than 50 locations across the country, to advertise a lease for the battery-powered Renault Zoe for practically free. And in the 20 days since the dealership put the offer online, there have been roughly 3,000 inquiries and around 300 people have already signed contracts.

“If we had more sales staff, we would have sold even more,” says Wolfgang Huber, head of electric car sales for the dealer in Berlin. “We did expect an increase in sales with the subsidies, but this run really struck us,” he says. The response from consumers proves that while they may be interested in switching to electric cars, the high purchase prices push them away.

German auto-trading Carfellows has also benefited from the subsidies. “This is a golden moment for us,” says Rainer Westdoerp, a spokesman for the Berlin-based startup. Thanks to national subsidies of up to 9,000 euros ($10,647.76) per electric vehicle, Carfellows will soon start offering leases of Daimler AG’s battery-powered Smart EQ for 9.90 euros ($11.71) a month.

European governance as a whole has been quite receptive to electric vehicle subsidies. The continent is home to eight of the nine countries with the largest national purchasing-subsidies According to Aleksandra O’Donovan, an analyst with BloombergNEF, governments will have to carefully weigh when to let those subsidies run out to avoid sales falling off a cliff, even though there will come a time when that won’t be a concern anymore.

“The decreasing price of batteries suggests that EVs should be cheaper to buy than gasoline cars from the mid-2020s. Once that happens, the market will accelerate even without subsidies.” Industry watchers think North American EV makers like Nikola Corporation (NASDAQ: NKLA) would be overjoyed if the U.S. and other governments implemented similar subsidies in North America.

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