Germany Faces Billions in Costs for Electric Vehicle Transition
A new analysis by consulting firm EY reveals a staggering financial burden on the German state as it pushes towards electric mobility.. Between 2025 and 2030, a combined total of €39.1 billion will be lost through active subsidies for electric vehicles and the resulting decline in revenue from traditional combustion engine taxation. The figures, published in the “Welt am Sonntag” highlight the considerable economic commitment required to meet ambitious climate targets and raise questions about long-term sustainability.
According to Constantin Gall, a partner at EY, the transition is inherently expensive. “We must be clear that the energy transition in the transport sector and the associated reduction in CO2 emissions in the transport sector will come at a very high price. Without these subsidies, the market would collapse”. The calculations are predicated on a significant increase in electric vehicle and plug-in hybrid adoption, with projections estimating 9.4 million such vehicles on German roads by 2030.
The largest component of this financial burden stems from the difference in taxation between electricity and fuel. Electric vehicle owners are projected to save approximately €21.5 billion by 2030 due to paying significantly lower electricity taxes compared to fuel taxes. Further savings of €3.9 billion result from exemptions from vehicle taxes, while preferential tax treatment for electric company cars, leveraging existing benefits, accounts for an additional €10.8 billion. A newly planned purchase premium for electric vehicles is projected to cost a further €3 billion.
The looming revisions to EU regulations concerning commercial fleet emissions pose a significant risk of escalating these costs further. EY experts caution that stricter mandates could substantially increase the anticipated tax shortfalls.
The federal environment ministry, spearheading the development of the new purchase premium, is keen to address criticisms levelled at the previous “Umweltbonus” scheme, which was terminated in 2024, citing issues with unintended benefits and inefficiency. A ministry spokesperson emphasized a renewed focus on targeted support, limiting incentives to private households, implementing a social stratification of benefits and excluding higher-income brackets to minimize “free ridership.
However, a clear plan for offsetting these substantial revenue losses remains conspicuously absent. A spokesperson for the federal finance ministry deflected questions, stating that a comprehensive strategy for compensating potential revenue gaps will be incorporated into future financial planning decisions alongside broader decarbonization strategies. This ambiguity is further underscored by declining energy tax revenues, as confirmed by the ministry’s own tax estimates. A representative also confirmed a likely decline in vehicle tax collection.
The escalating costs of Germany’s electric vehicle push expose a fundamental dilemma: the aggressive pursuit of climate goals demands significant public investment and tax concessions, placing a considerable strain on the national budget and prompting a critical examination of long-term financial viability. The absence of a concrete counter-financing strategy raises concerns regarding the sustainability of this ambitious transition and suggests potential political challenges ahead.
