Subsidized Electric Vehicles: A Growing Concern

Since 2022, owners of electric vehicles have found a new source of income: selling CO2 certificates. The "Umweltbonus" electric car purchase premium, intended to accelerate the electrification of Germany's car fleet, is being used by some for profitable car trading. This issue has been known for a while but remains unaddressed.

How Does it Work and Who is at Loss?

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• Minimal Effort, Maximum Gain: EV buyers easily claim the state subsidy of 6,000 euros and quickly resell the vehicles for profit, often to neighboring countries. This phenomenon has been reported by Schmidt Automotive Research, citing data from the Federal Motor Transport Authority (KBA).
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• Loss to German Taxpayers: “The loser is the German taxpayer, who indirectly subsidizes clean air in cities outside of Germany, rather than domestically,” stated market analyst Matthias Schmidt. A state-subsidized EV must currently be owned for six months before it can be sold, a practice widely used, often with the support of auto dealers promoting it.

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Let’s look at the Numbers:

According to KBA data, out of 890,000 fully electric cars registered in Germany between January 2012 and July 2022, only 756,517 were present in the German car fleet as of July 1, suggesting over 100,000 cars may have left German roads. This situation is not necessarily indicative of export, as these vehicles could also be decommissioned or involved in accidents.

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• Legal Loopholes Costing Taxpayers: The total subsidy for an electric car can reach up to 9,000 euros, with two-thirds provided by the state and the rest as a net discount by participating manufacturers. The Center of Automotive Management (CAM) reports that selling these subsidized vehicles abroad after the holding period costs taxpayers significant amounts. Similar trends of EV transfers have been reported from Switzerland.

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Addressing the Misuse of Electric Vehicle Subsidies: Future Changes

The German government is taking steps to address the misuse of electric vehicle subsidies, a practice that has led to substantial financial losses and undermined environmental initiatives. The key changes and strategies being considered and implemented are as follows:

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Extending the Minimum Holding Period

• Current Situation: As of now, EV owners are required to keep their subsidized vehicles for a minimum of six months before they are legally allowed to resell them. This short timeframe has facilitated the rapid resale of these vehicles abroad.
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• Proposed Change: The Federal Ministry of Economics is considering extending this period to at least twelve months. This change aims to decrease the profitability of quickly reselling subsidized EVs abroad. The longer holding period would result in a greater depreciation of the vehicle's value, making the resale less lucrative.

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Adjusting the Subsidy Structure

• Reduction in Incentives: From 2023, the total amount of subsidy available for EVs will be reduced. This decrease in financial incentives is expected to diminish the attractiveness of quick resales for profit.

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• Exclusion of High-Priced Models: Certain premium EV models, particularly those with higher price tags, will no longer be eligible for the full subsidy. This measure aims to target the subsidy more effectively towards affordable EVs and reduce the incentive for resale in luxury segments.

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Strengthening Monitoring and Compliance

• Tracking Vehicle Registration: The German government, through agencies like the KBA, is enhancing its monitoring of vehicle registration and ownership changes. This will help identify patterns indicative of subsidy misuse.

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• Stricter Enforcement: Authorities plan to enforce more stringent checks and penalties for non-compliance with the subsidy terms. This includes the possibility of demanding repayment of subsidies if the conditions are not met.

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Raising Public Awareness

• Educating Consumers: The government is working on campaigns to educate consumers about the intended use of subsidies and the consequences of misuse. This effort is directed towards fostering a more responsible and ethical approach to subsidy utilization.

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Exploring Alternative Incentives

• Long-term Incentives: Discussions are underway to develop incentives that encourage long-term ownership and use of EVs, rather than short-term financial gains. These might include benefits linked to the actual usage of the vehicle or its contribution to reducing emissions over time.

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Conclusion

While the subsidy scheme for electric vehicles aims to promote sustainable mobility, it's being exploited for personal gain through car trading. This practice not only undermines the purpose of the subsidies but also raises questions about the effectiveness of such policies in achieving long-term environmental goals. Strengthening regulations to prevent misuse while ensuring the benefits reach the intended recipients is crucial for the success of these environmental incentives.

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FAQs

What is the main issue with the current EV subsidy scheme in Germany?

The main issue is that some individuals are exploiting the "Umweltbonus" subsidy by quickly reselling subsidized electric vehicles, often abroad, for profit. This practice undermines the subsidy's intent to boost domestic electric mobility.

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How are EV owners making a profit from the subsidies?

EV buyers claim a state subsidy of up to 6,000 euros and can legally resell the vehicle after a six-month holding period, often selling to buyers in neighboring countries for a profit.

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What changes is the German government considering to address this issue?

The government is considering extending the minimum holding period from six to twelve months, reducing the total subsidy amount, excluding high-priced EV models from full subsidies, and implementing stricter monitoring and compliance measures.

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Why is it a problem if EVs are sold abroad after receiving the subsidy?

This practice results in a financial loss for German taxpayers, as the subsidies intended to promote clean air and sustainable mobility within Germany are effectively benefiting other countries.

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What are the long-term solutions being explored to encourage responsible EV ownership?

The government is exploring alternative incentives focused on long-term ownership and use of EVs. These may include benefits linked to the actual usage of the vehicle or its contribution to reducing emissions over time.

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