Environmental Bonus: Plug-in Hybrids to Be Phased Out of Subsidies Faster

The Federal Ministry for Economic Affairs is apparently planning a complete cut of subsidies for plug-in hybrid vehicles by the end of the year. Previously, the ministry had announced a new regulation starting in 2023, which would only provide subsidies for vehicles that "demonstrably have a positive climate protection effect," as stipulated in the coalition agreement. They initially aimed to define this effect through the minimum electric range and the portion of electric driving. However, this now appears impractical. Subsidizing these vehicles based on electric performance would have caused "disproportionately high effort" and has therefore been discarded, according to a letter from Parliamentary State Secretary Michael Kellner (Greens) to the members of the coalition, which was presented to the DPA. Thus, subsidies for PHEV models will end on January 1, 2023. Incentives for purely battery-electric models will gradually be reduced from 2023 to 2025.  

As expected, the plans were criticized by the Association of Motor Vehicle Importers, whose brands, like the German premium manufacturers, still heavily rely on high-margin, high-priced plug-in hybrid models, especially in the booming SUV segment.

“The phasing out of subsidies for plug-in hybrids would slow down the growth of electromobility and make it harder to achieve climate targets. Furthermore, the trust that was established through agreements in the coalition agreement would be sustainably destroyed. Public subsidies are still necessary to keep plug-in hybrids competitive against thermally powered vehicles," said VDIK President Reinhard Zirpel.

Additionally, the letter rejects the industry's demand to return to a two-stage application process for the environmental bonus. Zirpel argues that relying on the approval of the vehicle for subsidies already leads to significant reluctance to purchase vehicles with electric or plug-in hybrid drives. Due to the sometimes long delivery times for these vehicles, caused by supply shortages for vehicle components, the eligibility for subsidies can no longer be guaranteed.

"Manufacturers have been bearing their share of the environmental bonus from the start. Increasing this share to compensate for uncertainty about the delivery time is not financially viable," Zirpel further mentioned.

What does this mean?

A clear cut in subsidies for plug-in hybrid vehicles would be consistent. These part-time electric vehicles were often abused to claim the subsidy and contribute little, if at all, to climate protection in a manner verifiable with reasonable effort. The rapid growth of pure electric mobility with ever-increasing ranges makes the expensive, heavy, and complex dual-drive concept appear archaic much faster than expected.

Even for vacation trips, a PHEV is already an "old hat," as BEV models routinely break the 400-kilometer mark completely emission-free and gain more ground with fast-charging technology and the expansion of HPC charging infrastructure. In 2023, there will simply be no serious need in Germany to buy a plug-in hybrid instead of a BEV. Period.

Additionally, part-time electric vehicles are often the top models of their respective ranges, frequently adorning trendy but counterproductive SUVs for climate protection with a green fig leaf. Their owners, to be honest, rarely depend on state subsidies. Moreover, due to the dual drive, these heavy vehicles tend to consume heavily on long distances, as undersized gasoline engines quickly reach their limits - and besides CO2, other pollutants like nitrogen oxides and fine dust also soar. It seems that, considering CO2 emissions, any diesel performs better on many long-distance trips compared to its PHEV counterpart.

Annoyance: PHEVs blocking public charging infrastructure

Another aspect: PHEVs, usually equipped with weak AC chargers, occupy public charging stations seemingly forever - for their paltry 50 kilometers of range. It hardly helps if the requirements now rise to 60 or 80 km. The luxury of numerous PHEVs is something the urgently expandable urban charging infrastructure cannot afford. Especially since a car, as a long-lasting investment good, stays in the world for 10 to 15 years.

What should happen to all the first-generation PHEVs? They continue their severely limited existence as part-time electric vehicles with aged batteries.

And they unnecessarily keep the share of fossil fuels in transportation high. Unlike pure electric vehicles, they do not become cleaner with the electricity mix - only within the constraints of their mini-battery. A marginal contribution, indeed. Rightfully so, down with the subsidization of misguided technology.  

Now it is important for the Ministry of Economic Affairs and Climate Protection to remain consistent with the subsequent steps: Preferably subsidizing compact electric vehicles in the lower price and weight range, but finally also for electric light vehicles (LEV) or e-cargo bikes, which often unfortunately still cost as much as a small car. This would set up the subsidy landscape consistently anew - clearly focused on climate protection. This is now all that matters.