Tesla Compensates for German EV Subsidy Cut with New Incentive Plan

Tesla will cover lost electric vehicle incentives for German consumers until December 31, after the German government abruptly terminated the program.

Germany Just Ended Subsidies for Electric Vehicles

Faced with a fiscal crisis, Germany's coalition government discontinued the "environmental bonus" program on Saturday, effective Sunday, per Investors.com. This is an increase from the previously anticipated December 31 expiration date. This is a setback for Tesla, Volkswagen (VWAGY), BMW (BMWYY), Stellantis (STLA), and other companies.

Germany's EV subsidy had been up to 4,500 euros ($4,909) for consumers, with the automaker receiving 2,250 euros.

Just a few days ago, Berlin stated that the EV subsidy would be cut to 3,000 euros ($3,273) in 2024.

The EV subsidy for corporations ceased on September 1 and was limited to private persons. The elimination of the company tax prompted a rush to purchase EVs.

However, with the subsidy program ending two weeks early, a last-minute shopping spree was threatening. Tesla recently offered 0.99% financing to German buyers who bought by December 18 and accepted delivery by December 31. Many of them who ordered under that promotion will no longer be eligible for the 4,500-euro subsidy.

On Monday, the EV giant announced via Elon Musk’s X that "Tesla will compensate for the termination of the government EV subsidy in Germany for new Model 3/Y orders (starting 18 Dec for vehicles delivered by 31 Dec)."

Tesla is exceeding its 1.8 million vehicle target for 2023. To do this, the EV behemoth must sell slightly under 476,000 EVs in the fourth quarter.

The substantial new Germany incentive, combined with large inventory reductions, could help Tesla cross that threshold. However, it is just another action that will reduce earnings and profit margins.

Tesla's Berlin-area plant is expected to shut down after December 22 and not reopen until January 2, 2024. The plant, like Tesla Shanghai, is operating at less than full capacity.

Subsidies for Tesla Model 3 No Longer Available in France

Germany's action comes as France tightens curbs on EV subsidies, according to Reuters.

As of December 15, France effectively limited EV subsidies of up to 7,000 euros ($7,636) to European-made electric vehicles. Vehicles manufactured in China, including the Tesla Model 3, are no longer eligible. The Model Y will still be eligible because Tesla manufactures the crossover in the Berlin area.

French Model 3 sales jumped in November and are expected to remain robust in the first half of December but should now begin to decline. This will have an effect on Tesla Shanghai.

Tesla's two main European markets are Germany and France.

Photo: Bram Van Oost/Unsplash