Germany’s automotive market is struggling, with new car registrations falling to 2.8 million, a 1% decline from the previous year. Electric vehicle sales have dropped significantly by over 18% due to the abrupt cancellation of government incentives, while plug-in hybrids saw a slight increase. Experts suggest enhanced incentives and improved conditions could revitalize the market, but uncertainty remains amid discussions of new regulations and potential subsidies. The industry anticipates a slight recovery in sales by 2025.
The Struggles of the German Automotive Market
The automotive landscape in Germany is facing significant challenges, with new car registrations reaching only 2.8 million last year, according to the Federal Motor Transport Authority. This figure represents a further decline of 1 percent from an already sluggish previous year.
Prior to the pandemic, the market was more robust, consistently surpassing 3 million in sales and peaking at 3.6 million in 2019. Since then, figures have fluctuated between 2.6 and 2.9 million, exacerbating the ongoing crisis within the automotive sector. Notably, commercial customers accounted for more than two-thirds of new registrations, while private customer registrations saw a concerning decline of 2.1 percent—double the overall market drop.
Trends in Electric Vehicle Sales
The segment of electric vehicles has faced a particularly steep decline, with new registrations plummeting by over 18 percent to 573,000. This downturn can be largely attributed to the unexpected cancellation of government purchase incentives just before 2024, leaving many potential buyers uncertain. The federal government, under the direction of Green Economy Minister Robert Habeck, made this abrupt decision as the state treasury was experiencing significant strain.
As a result, the registration of purely electric vehicles fell by 27 percent, bringing the total to 380,000 units and reducing market share from over 18 percent to just 12.5 percent. Conversely, plug-in hybrids experienced a 9 percent increase, with 192,000 new registrations. The average CO2 emissions for newly registered passenger cars also rose by 4.2 percent to 119.8 g/km, with stricter EU regulations set to require only 93.6 g/km by 2025.
“2024 was a lost year for electromobility in Germany,” states Constantin Gall, head of Mobility for Western Europe at consulting firm EY. The sudden cessation of government incentives has created lasting uncertainty among buyers, despite the introduction of new and appealing models. Sales figures have fallen short of industry expectations and political ambitions, Gall added.
Ferdinand Dudenhöffer from the Center Automotive Research noted that the order backlog for German automakers is at its lowest in a decade, and he predicts that the upcoming year may not bring significant improvement. For 2025, he anticipates only a slight rise in car sales to approximately 2.84 million units, which includes a potential rebound in electric vehicle sales.
To facilitate a turnaround in the electric vehicle market, experts advocate for enhanced incentives and improved conditions, such as tax breaks for electric vehicle purchases. Imelda Labbé, president of the Association of International Motor Vehicle Manufacturers, suggests that reducing VAT could be more effective than direct purchase premiums.
Gall believes that electric vehicle sales should see a strong recovery this year, as all stakeholders recognize the need for change. Currently, electric vehicles are perceived as a luxury for high earners, as their prices remain high compared to similar combustion engine models. Additionally, there is a pressing need for improvements in charging infrastructure and cost.
With expectations of falling prices and increased discounts on electric vehicles due to heightened competition and a sluggish economy, observers are cautiously optimistic. Stricter emissions regulations set to take effect in 2025 will compel manufacturers to boost electric vehicle sales, potentially leading to a reduction in the price gap between electric and combustion vehicles.
However, ongoing discussions about new incentives and market regulations create an atmosphere of uncertainty. As the federal election campaign progresses, potential buyers may hesitate to commit to a purchase, waiting for possible government subsidies that could stimulate the electric vehicle market, which experts speculate could be introduced as early as May.
Stay connected with Frankfurt economic correspondent Michael Rasch on platforms like X, LinkedIn, and Xing for more insights.