Germany will reinstate federal incentives for electric vehicle purchases from January 1, 2026, allocating €3 billion ($3.5 billion) in funding through 2029 as the government seeks to revive demand and support its struggling automotive industry.
The decision comes two years after Berlin abruptly ended its previous EV subsidy scheme due to budget constraints, a move that led to a sharp decline in electric vehicle sales in 2024. The new programme has been approved under the government of Chancellor Friedrich Merz.
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Under the revised scheme, the government will pay buyers between €1,500 ($1,740) and €6,000 ($7,000) per vehicle, depending on the model and household income and size, Environment Minister Carsten Schneider told Bild newspaper. Schneider said the total funding would be sufficient to support the sale of around 800,000 electric vehicles over the next three to four years.
Germany’s automotive sector has been under pressure from rising production costs, supply chain disruptions and intensified competition from Chinese electric vehicle manufacturers. Schneider said concerns about foreign competition should be kept in perspective, noting that around 80% of newly registered electric and plug-in hybrid vehicles in Germany in 2025 were produced in Europe.
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The policy shift comes as Germany continues to influence broader EU vehicle regulations. Last year, Berlin led efforts—alongside Italy and industry groups—to soften the European Union’s de facto ban on new petrol and diesel passenger cars from 2035. The European Commission has since proposed allowing technologies such as plug-in hybrids, range extenders and certain combustion-engine vehicles to remain part of the market beyond that date.
