The end of the subsidy program isn’t the only factor contributing to Germany’s EV slowdown, but the abrupt axing certainly had an effect: While many countries across Europe saw steady or growing sales of new EVs in the past year, Germany’s sales fell. It’s not just Germany ending these subsidy programs, either. Sweden and New Zealand have also scrapped their schemes and seen a resulting slowdown or drop in sales. This all comes at a time when the world needs to dramatically ramp up efforts to move to zero-emissions vehicles and pull fossil-fuel-powered ones off the roads to address climate change.
Experts are now cautioning that ending these support systems too soon could jeopardize progress on climate change. As EVs continue to enter the mainstream, the question facing policymakers is how to decide when the technology is ready to stand on its own—something that will likely vary in each market.
Money can be a powerful tool to persuade people to adopt a new technology. “Cost is the main driver,” says Robbie Orvis, senior director for modeling and analysis at Energy Innovation, a policy research firm specializing in energy and climate.
A government’s toolbox to support new tech includes economic incentives, standards and rules, and research and development support. Generally, a mix of those things will be most effective at boosting new technologies, Orvis says.
Economic incentives can either make a new technology cheaper or make the incumbent one more expensive. Either way, they help level the playing field early on in a technology’s development, Orvis says. This pattern played out with solar power—the cost of solar panels is 90% lower than it was just a decade ago, in part because of government programs that subsidized their production.
Eventually, as the new technology scales, costs should drop until the point when you don’t need incentives anymore and can instead turn to other tools like mandates, he says.
Electric vehicles are being produced in much greater numbers and are much closer in cost to gas-powered ones than they were just a few years ago, but there’s still a difference in the sticker price.
Today, the cost of owning an EV over its entire lifetime rivals the lifetime cost of a gas-powered car. However, electric vehicles often have a higher up-front price and deliver savings over time in the form of cheaper maintenance and operating costs. Gas-powered cars can be cheaper initially but bring higher maintenance and fueling costs over time.