Germany Revives EV Subsidies with €3 Billion Programme for 2026
BERLIN, 19 January 2026 – After a two-year hiatus, Germany is reintroducing financial incentives for electric vehicle purchases, launching a targeted €3 billion programme aimed at making electromobility accessible to low and middle-income households. The move comes alongside a parliamentary decision to extend the vehicle tax exemption for new electric cars until 2035, creating a dual-policy approach to reinvigorate the country’s EV market.
A Targeted Relaunch After Market Contraction
Germany’s national purchase subsidy, the Umweltbonus, was abruptly terminated in December 2023 following a constitutional court ruling on budget constraints. The Federal Office of Economics and Export Control (BAFA) officially closed the programme on 1 January 2024, creating a subsidy vacuum that saw electric vehicle registrations drop by approximately 27% in 2024. Between 2016 and 2023, the previous scheme disbursed roughly €10 billion in support for about 2.1 million EVs.
The new programme, agreed upon by the coalition government in October 2025, allocates €3 billion from the national Climate & Transformation Fund and the EU Social Climate Fund. Vice-Chancellor Lars Klingbeil (SPD) emphasised that the reallocation means the subsidies should not enlarge the federal budget deficit, addressing the fiscal sensitivities that led to the previous programme’s termination.
Key Programme Parameters
| Aspect | Reported Details |
|---|---|
| Start Date | 1 January 2026 (retroactive applications expected) |
| Total Budget | €3 billion (estimated to support 750,000-850,000 vehicles) |
| Subsidy Amount | €3,000-€4,000 per vehicle (reports vary) |
| Target Group | Low and middle-income households (income thresholds under discussion) |
| Vehicle Price Cap | €45,000 net list price reported (down from €65,000 previously) |
| Administration | Federal Office for Economic Affairs and Export Control (BAFA) |
Extended Vehicle Tax Exemption
In a complementary measure, the Bundestag has extended the vehicle tax exemption for electric cars. Previously set to expire for vehicles registered after 31 December 2025, the exemption has been extended by five years. Electric vehicles first registered or converted to electric drive by 31 December 2030 will now be exempt from motor vehicle tax for up to ten years, though not beyond 31 December 2035.
This means that from 2026 onward, newly registered electric vehicles will benefit from the tax exemption, providing long-term financial relief beyond the initial purchase incentive. The extension received broad parliamentary support, with only the right-wing AfD party voting against it.
Areas of Ongoing Negotiation
While the broad framework is established, several key details remain under discussion within the coalition government and with automotive industry representatives:
Eligibility Criteria: Income thresholds are still being negotiated, with various proposals circulating. Some reports suggest an annual gross income cap around €60,000, while others mention taxable household income limits of €80,000-€90,000, with increases for families with children.
Vehicle Eligibility: There is conflicting information about whether plug-in hybrid vehicles (PHEVs) will be included. Some sources indicate only battery electric vehicles (BEVs) will qualify, while others suggest PHEVs may be eligible, potentially with lower subsidy amounts. The inclusion of used electric vehicles is also under discussion, possibly for a later phase of the programme.
Programme Format: The government is considering both direct purchase grants and social leasing models inspired by France’s programme, which offers electric cars for approximately €99 per month over three years.
Industry Response and Market Outlook
The German Association of the Automotive Industry (VDA) has welcomed the clarity provided by the subsidy announcement while emphasising the need for swift implementation. “Consumers, businesses, and dealers need clarity regarding the criteria and processing of the subsidies,” stated VDA President Hildegard Müller. The association forecasts nearly one million new registrations of electric passenger cars in Germany in 2026, representing a 17% increase compared to 2025, contingent on the smooth implementation of the new subsidies.
SPD Secretary-General Tim Klüssendorf emphasised the industrial policy dimension: “What matters to me in designing this programme is that it must primarily benefit the German and European automotive industries. The future is electric, and we want it to be written at German production sites.” This has led to discussions about potentially excluding Chinese-made electric cars from the scheme.
Frequently Asked Questions
When can I apply for the new EV subsidy?
The programme is scheduled to begin on 1 January 2026, with the Federal Office for Economic Affairs and Export Control (BAFA) expected to handle applications. Some reports suggest the subsidy may be applied retroactively for vehicles purchased after this date.
How much will the subsidy be?
Reports vary between €3,000 and €4,000 per vehicle, with some proposals suggesting higher amounts for families with children. The final amount will be confirmed when the detailed programme design is announced.
Are used electric cars eligible?
This remains under discussion. Some proposals include used EVs to improve affordability, particularly for lower-income households, but it may not be part of the initial phase starting in 2026.
How does the vehicle tax exemption work?
Electric vehicles first registered or converted to electric drive by 31 December 2030 are exempt from motor vehicle tax for up to ten years, but not beyond 31 December 2035. This applies regardless of whether the vehicle receives a purchase subsidy.
What income level qualifies as “low and middle income”?
Specific thresholds are still being negotiated. Proposals range from annual gross incomes around €45,000-€60,000 to taxable household incomes up to €80,000-€90,000, with adjustments for family size.