Electric-Car Subsidies Make Renaults Free in Germany

Source: By Elisa Miebach, Bloomberg • Posted: Wednesday, July 15, 2020

Car buyers in Europe can now get their hands on a brand-new electric vehicle for less than the typical cost of a mobile-phone contract. Thanks to newly generous subsidies, some are even free.

Shoppers have swarmed virtual showrooms in Germany and France — the region’s two largest passenger-car markets — after their national governments boosted electric-vehicle incentives to stimulate demand. Their purchase subsidies are now among the most favorable in the world, according to BloombergNEF.

The state support is allowing Autohaus Koenig, a dealership chain with more than 50 locations across Germany, to advertise a lease for the battery-powered Renault Zoe that is entirely covered by subsidies. In the 20 days since it put the offer online, roughly 3,000 people have inquired and about 300 have signed contracts.

“If we had more sales staff, we would have sold even more,” said Wolfgang Huber, head of electric-car sales for the dealer in Berlin, who published a Facebook post asking customers to be patient. “We did expect an increase in sales with the subsidies, but this run really struck us.”

Chancellor Angela Merkel and President Emmanuel Macron have sought to soften the coronavirus pandemic’s blow to the badly hit car sector. Sales in Europe have recovered more slowly in Europe than in China or North America, pressuring policy makers to support major sources of employment and economic activity.

In France, sales of Renault’s Zoe model are on track to double this year even as demand for gasoline vehicles has cratered. And in the Netherlands, where the city of Amsterdam is banning non-electric cars from 2030, a 10 million-euro ($11.4 million) fund to support EV purchases was used up in just eight days this month.

“There are a lot of attractive offers right now because of higher subsidies, and that’s boosting demand,” said Aleksandra O’Donovan, an analyst with BloombergNEF. “The EU is pushing toward decarbonizing transport, and the coronavirus crisis has allowed them to accelerate that.”

Germany’s subsidies of as much as 9,000 euros per electric vehicle have boosted sales for Carfellows, a German auto-trading website, about tenfold.

“This is a golden moment for us,” said Rainer Westdoerp, a spokesman for the Berlin-based startup, which on Wednesday will start offering leases of Daimler AG’s battery-powered Smart EQ for 9.90 euros a month.

Carfellows took down a similar offer for the Smart model in June after about 1,000 customers reached out within three days and the automaker couldn’t supply cars fast enough, Westdoerp said.

While the best deals — including Carfellows’s Smart offering — are usually for buyers of company cars because of perks including tax and risk rebates, private drivers in Germany can still lease an electric car from the site for as little as 39 euros a month. In France, where the government raised subsidies to 7,000 euros per car this year, customers can lease the Zoe from 79 euros a month.

Buyers will have to read the fine print, as some offers come with additional one-time fees or down payments. And not everyone in Europe is spending more to speed up EV adoption, with the U.K. and Belgium recently cutting aid. China had planned to end its subsidies this year but extended them to 2022 in response to the pandemic.

But in general, the picture looks attractive for European buyers as the continent is home to eight of the nine countries with the largest national purchasing-subsidies, according to BNEF.

Governments will have to weigh carefully when to let those subsidies run out to avoid sales falling off a cliff. But there will come a time when that won’t be a concern anymore, O’Donovan said.

“The decreasing price of batteries suggests that EVs should be cheaper to buy than gasoline cars from the mid-2020s,” she said. “Once that happens, the market will accelerate even without subsidies.”