Electric vehicle subsidies in Germany will end abruptly, the government announced on Saturday, in a blow to Tesla (TSLA), Volkswagen (VWAGY), BMW (BMWYY), Stellantis (STLA) and others.
Germany’s coalition government, which is facing a budget crisis, will end the “eco-rebate” programme on Sunday, rather than on 31 December as planned. But a vehicle must be registered before a buyer can take delivery, so the EV subsidy is effectively over.
Germany’s EV subsidy was up to 4,500 euros ($4,909). A few days earlier, Berlin announced that the EV subsidy would not continue in 2024 at a reduced rate of 3,000 euros ($3,273).
On 1 September, the EV subsidy expired for companies and was limited to private individuals. The expiration of the business tax also spurred a big rush to buy EVs.
But with the subsidy programme ending two weeks early, the last-minute buying frenzy was cut short. As recently as 12 December, Tesla offered German buyers 0.99% loans for those who ordered by 18 December and took delivery by 31 December. Many of those who ordered under this promotion won’t get the €4,500 subsidy now.
Tesla’s Berlin factory will reportedly cease production after 22 December and will not reopen until 2 January 2024. The factory, like Tesla Shanghai, is operating well below capacity.
Tesla Model 3 subsidies lost in France
Germany’s move comes amid tighter restrictions on EV subsidies in France.
As of 15 December, France effectively limited EV subsidies of up to €7,000 ($7,636) to electric cars made in Europe. Vehicles made in China, including the Tesla Model 3, are no longer eligible. The Model Y is still eligible because Tesla makes the crossover at its factory near Berlin.
French Model 3 sales surged in November and were probably strong in the first half of December, but are now expected to fall. This will affect Tesla Shanghai.
Germany and France are Tesla’s two biggest markets in Europe.
IRA credits reduced
Meanwhile, the base rear-wheel-drive and long-range Model 3 will lose $7,500 in tax credits under the Inflation Reduction Act from 1 January due to tighter restrictions on battery sourcing. Until a week ago, these Model 3 vehicles were expected to lose half of their credits.
The base RWD Model 3 uses LFP batteries from China’s CATL. The LR Model 3 uses traditional 2170 lithium-ion batteries from South Korea, but some materials and components come from China.
Tesla will presumably try to source batteries to regain these credits, but there’s no quick fix. The Tesla-Panasonic factory outside Reno has limited production. Tesla’s 4680 battery cell production is ramping up from a low base.
Expiring or reduced EV subsidies and credits have acted as a pull-forward demand incentive for Tesla in these markets. Unless there are further significant price cuts or discounts, demand in these countries is likely to weaken significantly next year.
Tesla stock
Tesla shares rose 4% to 253.50 on heavy volume last week, clearing two early entries. TSLA has an official buy point of 278.98 from a five-month double bottom.
