Germany to reduce electric car subsidies in 2023

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Tesla cars are seen parked at the construction site of the new Tesla Gigafactory for electric cars in Gruenheide, Germany, March 20, 2022. REUTERS/Hannibal Hanschke/

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BERLIN, July 26 (Reuters) - Germany will reduce financial incentives to buy electric cars next year after an agreement within the governing coalition, as the vehicles' growing popularity makes government subsidies unnecessary, Germany's economy ministry said on Tuesday.

The incentives, or premiums, paid to buyers of electric cars will expire completely once an allocated sum of 3.4 billion euros ($3.44 billion) from the next two years' budget is spent, according to government sources.

"E-vehicles are becoming more and more popular and will no longer need government subsidies in the foreseeable future," Economy Minister Robert Habeck said in a statement.

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Under the plan, premiums for fully electric-powered vehicles priced below 40,000 euros will fall to 4,500 euros at the beginning of next year from 6,000 euros currently, and fall to 3,000 euros in the following year.

For cars priced over 40,000 euros the premium will drop to 3,000 euros at the start of next year from 5,000 euros currently.

There is no subsidy for the purchase of cars priced over 65,000 euros, and that will apply to vehicles priced at 45,000 euros and more from 2024.

Subsidies for company cars will be eliminated, with only private consumers benefiting from the scheme.

The government will also axe incentives for plug-in hybrid cars at the end of the year - something which the economy minister had advocated due to doubts over the double-engined vehicles' climate credentials as they are heavier and the battery-powered mode often lasts for only short distances.

"For the forthcoming funding phase, we are placing a clear focus on climate protection and are concentrating funding on purely battery-electric vehicles," Habeck said in a statement.

The German Cabinet is expected to sign off on a draft climate action budget to provide the funding for the scheme on Wednesday.

Sales of all-electric cars almost doubled to 328,000 in 2021 compared to the previous year, thanks in part to the scheme. There are now over 600,000 electric-powered vehicles on German roads. Including hybrids, there are well over a million.

The share of purely electric cars in new car registrations in Germany recently came in at around 14%.

Volkswagen (VOWG_p.DE) has the largest market share for electric cars in Germany at 20.3%, followed by Tesla (TSLA.O) with 11.2%, according to the latest figures from motor vehicle authority KBA.

The VDA auto association criticised the planned subsidy cuts.

"In times of rising costs and burdens, the decision to unilaterally and comprehensively cut funding is incomprehensible," VDA President Hildegard Mueller said in a statement.

She also slammed the move to exclude company cars from the initiative, saying that "a switch to e-mobility is needed in all fleets."

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Reporting by Markus Wacket, Riham Alkousaa and Victoria Waldersee; Writing by Maria Sheahan and Rachel More; Editing by Jan Harvey, Josie Kao and Leslie Adler

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