Berlin, August 2026: The federal government’s e-car bonus is becoming a problematic instrument in terms of industrial policy. Private buyers have been able to apply for subsidies since May 19th, retroactively for new registrations since the beginning of the year. The federal government will provide three billion euros for this by 2029. At the same time, German manufacturers are losing market share in the electric segment, while Tesla and Chinese providers are growing strongly. The design of the funding is crucial: it is not linked to German or European production. As a result, tax money can increase demand precisely where foreign competitors are currently particularly competitive, while value creation at German manufacturers falls.
Billions in Subsidies Without Safeguards for German Value Creation
The subsidy for purely electric vehicles generally amounts to 3,000 euros; however, up to 6,000 euros is possible depending on income and the number of children. Certain plug-in hybrids and vehicles with range extenders are also eligible for the subsidy. According to the government, the program is intended to cover around 800,000 vehicles. To date, there is no binding requirement regarding production or value creation within Europe.
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Sales are surging, yet German manufacturers do not automatically benefit from this trend. In July, 78,609 purely electric vehicles were newly registered—an increase of 61.7 percent compared to the previous year. Their share of the total new car market rose to 29.3 percent. However, the CAM identifies a wider range of available models and high fuel prices, alongside government incentives, as key drivers. Consequently, the subsidy is entering a market that is already experiencing significant growth.
EV subsidy accelerates market shift favoring competitors
This shift is particularly evident in the second quarter. According to EY, total new registrations of electric vehicles rose by 54 percent. While sales by German automakers increased by 31 percent, their combined market share fell from 63.1 percent to 53.9 percent. Chinese manufacturers grew by 64 percent, while other foreign providers saw an increase of 101 percent. Thus, the EV subsidy is accelerating a market in which competitors are currently growing faster than domestic manufacturers.
Recent data from the CAM confirm this trend. In the first half of the year, the BEV market share held by German brands dropped from 63.5 percent to 54.2 percent. Meanwhile, Chinese manufacturers recorded over 38,000 new electric vehicle registrations, marking a 68 percent increase. The CAM is therefore calling for regulations that keep more value creation within Europe—precisely the kind of industrial policy safeguard currently lacking in the German subsidy scheme.
German manufacturers are losing ground precisely in the subsidized private market
However, the initial data on subsidies require careful interpretation. By the end of June, Tesla, Škoda, and Renault led the list of approved applications by brand. Volkswagen, the first German brand to appear, ranked only eighth. Yet, Tesla manufactures the Model Y in Grünheide, and Škoda is part of the Volkswagen Group. Furthermore, according to the Ministry of the Environment, Chinese manufacturers accounted for less than 15 percent of applications to date. Consequently, a foreign brand does not automatically equate to foreign value creation.
For German automakers, the structure of the subsidy scheme remains problematic. It expands the subsidized private market, a segment where German manufacturers have hardly any presence—particularly in the low-price category below 25,000 euros. It is precisely here that Chinese brands and other importers encounter highly price-sensitive buyers. At the same time, the state effectively subsidizes a portion of the purchase cost. EY therefore points to a “double pressure” arising from lost market share and the risk of consumers forming new brand loyalties. From an industrial policy perspective, the subsidy scheme may currently be doing German manufacturers more harm than good; while the state boosts electric vehicle sales, it guarantees neither German market share nor additional domestic value creation.