New e-car premium: Three-quarters of applications from lower income groups

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Since May 19, almost 104,000 applications for e-car subsidies have been received by the Federal Office for Economic Affairs and Export Control. Around three-quarters of all subsidy applications submitted so far come from households with a taxable annual income of no more than 60,000 euros. Just under half of the approvals are for the lowest income bracket up to 45,000 euros. The new, socially tiered e-car subsidy program from the federal government is apparently reaching the desired target group.

As the Federal Ministry for the Environment announced, the subsidy applies to new registrations from January 1, 2026, and runs until the end of 2029. The program is endowed with 3 billion euros and is designed for approximately 800,000 subsidized vehicles. Eligible are pure battery-electric vehicles, fuel cell vehicles, as well as plug-in hybrids and range extender models, provided they emit a maximum of 60 grams of CO₂ per kilometer or have an electric range of at least 80 kilometers.

Who benefits from electric car subsidies?

The basic subsidy is 3,000 euros for pure electric cars and 1,500 euros for eligible plug-in hybrids. In addition, there is a social tiering: households with a taxable income of up to 60,000 euros receive a supplement of 1,000 euros, and at a maximum of 45,000 euros, another 1,000 euros are added. For each child under 18, there is an additional 500 euros for a maximum of two children. In the best-case scenario, the subsidy for a pure e-car thus sums up to 6,000 euros. Private households with a taxable income of up to 80,000 euros are eligible for subsidies; this limit increases by 5,000 euros per child to a maximum of 90,000 euros.

According to data from the Federal Ministry of Finance, around 42 percent of all income taxpayers are below the 45,000-euro threshold, while about 54 percent earn less than 60,000 euros in taxable income. The number of applications submitted so far suggests that almost the entire program volume of 3 billion euros will flow to lower and middle-income households. By early August 2026, over 52,000 applications had been received from the lowest income bracket, and another approximately 22,500 from the middle tier.

Used car market under pressure

New car subsidies are causing used electric cars to lose value significantly. DAT CEO Jens Nietzschmann warns that the depreciation of used e-cars is likely to be “higher than the subsidy budget of three billion euros”. According to DAT, the residual value of three-year-old electric cars at the end of 2025 was only 49 percent of the list price, while diesel cars were at 61 percent and gasoline cars at almost 63 percent. The median price of used e-cars fell below 30,000 euros for the first time in over a year at the beginning of 2026. For households that cannot afford a new car, entry prices for used cars are decreasing, but at the same time, they bear a higher risk of depreciation upon resale.

Doubts about climate efficiency

The climate impact is also under discussion. A study by the German Institute for Economic Research (DIW) on the previous purchase premium found that only about 40 percent of subsidized new electric car registrations were actually triggered by the premium; the rest would have been sold without subsidies. The estimated avoidance costs were about 870 euros per ton of CO₂ for battery-electric cars and around 2,470 euros per ton for plug-in hybrids. From July 2027, the CO₂ assessment is to be more strongly focused on real emissions, which could tighten the subsidy conditions for hybrids. However, subsidized hybrids or cars with so-called range extenders are unlikely to have any major impact even today, as the current premium is already being applied for by battery-electric cars in over 90 percent of cases anyway.

Volume manufacturers with affordable electric car models in particular benefit from the subsidy. Nevertheless, dealers and manufacturers are not refraining from reducing their discounts to skim off part of the subsidy funds. Premium providers with electric or hybrid cars, which are predominantly in the higher price segment, benefit little from the premium. They can, however, continue to benefit from the favorable company car taxation of 0.25 percent of the gross list price, which has been in effect since mid-2025 for e-vehicles up to 100,000 euros. The new purchase premium is exclusively aimed at private individuals.

City versus Country: Different Conditions

Whether the premium has a greater impact in rural areas or in cities depends crucially on the charging infrastructure. According to the Mobility Panel, rural households with longer commuting distances and fewer public transport alternatives more often meet the economic conditions for e-cars. In cities, on the other hand, a lack of charging infrastructure in apartment buildings hinders the transition. A new federal program with 500 million euros in funding for charging points at residential buildings is intended to remedy this, with up to 1,500 euros in subsidies per charging point and 2,000 euros for bidirectional charging options.

(fpi)