Navigant Research Blog

Untapped PEV Potential in Germany

Scott Shepard — February 26, 2016

EV RefuelingAll things equal, Germany’s market for plug-in electric vehicles (PEVs) should be struggling a lot more than it currently is. Unlike other large automotive markets in Europe and across the globe, Germany provides no purchase subsidies for PEVs, and the incentives it does offer are relatively benign. However, despite the government’s lack of interest, Germany’s PEV market share in 2015 edged out the U.S. PEV penetration rate of just less than 0.7%.

To be fair, Germany does provide some special incentives for PEV owners that include special parking, bus lane access, and an exemption from the annual motor vehicle tax (or circulation tax) for 10 years. The tax is based on engine displacement, fuel type, and emissions characteristics, so the total tax liability will vary as shown in a 2012 study on European vehicle taxes.

The study compared six internal combustion engine (ICE)-powered vehicles across European Union member states; in Germany, the annual circulation tax per vehicle ranged from €17.5 (~$19) to just under €468 (~$515). PEVs are most commonly found in small vehicle classes and compete against the most fuel efficient ICE-powered vehicles, which means this exemption would likely equate to savings near the €17.5 figure, which represented the tax liability estimate for a Fiat 500.

The value of the exemption is irrelevant when compared against the premium for PEV technology and the thousands of dollars in tax credits doled out by the U.S. federal and state governments, tax exemptions in Norway, or other grants, rebates, and credits in the United Kingdom, France, China, and so on. Yet somehow, in 2015, Germany’s PEV market share beat the United States, Japan, and most other developed and developing countries.

A Western European Trend

Much of Germany’s 2015 PEV success can be attributed to the fact that it is a Western European country—2015 PEV sales in Western Europe more than doubled 2014 figures. PEV availability throughout the region expanded considerably, and the consistently low oil prices that have been said to be pushing some consumers away from hybrids and PEVs in the United States have had only a marginal impact on actual retail fuel prices in Europe.

However, if the German government has actual interest in meeting its 1 million electric vehicles by 2020 goal, it cannot solely rely on its current package of incentives and indirect market forces. So far, only about 50,000 PEVs have been sold in Germany since 2010 (when the goal was announced); to get to 1 million in 2020, the market has to grow by more than 80% annually for the next 5 years.

Hitting 80% growth annually would put the German PEV market at 450,000 sales in 2020, which is over 14% of the country’s vehicle market in 2015. A large jump no doubt, but it’s not all that unbelievable in Europe, where most national markets more than doubled in 2015 and PEV market share just missed 20% in Norway and 10% in the Netherlands. Of note though, these figures don’t happen in isolation; PEV incentives in Norway and Netherlands are some of the best in the world.

Germany appears to be registering this and is reportedly mulling PEV incentives of over €2 billion (~$2.2 billion) in the form of a €5,500 (~$6065) purchase incentive. If Germany adopts an incentive and its market is as sensitive to these incentives as its neighbors are, the €2 billion could go fast.

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