The choice of drive type is heavily influenced by new car prices, energy prices, and, of course, emission regulations. Announcements from politicians at both the national and EU levels are also influential. The impact of these factors is evident in the demand behavior in the German new car market.
1. Diesel, Diesel Scandal, and Petrol Cars
The Dieselgate scandal began in 2015. Until then, diesel engines had annually increasing market shares. But from 2018, there was a shift towards petrol cars due to emissions values, regulations, and regional driving bans resulting from contradictory regulations.
2. Electric and Hybrid Cars – Market Share Comparison
From 2018, a new development emerged. Both petrol and diesel cars began to lose market share simultaneously, marking the rise of mild and full hybrids. Diesel was still shunned due to its emission risks, and high fuel prices made petrol cars less attractive. Automakers followed the trend and switched to more cost-effective hybrids. A good price-performance ratio marked the beginning of the hybrid trend, which continues today.
Market Shares of Hybrid and Electric Cars in New Passenger Car Sales in Germany
Significantly, the end of sales premiums for plug-in hybrids (PHEV) at the beginning of 2023 led to a noticeable drop in PHEV sales in Germany. This resulted in a slight and unwanted increase in the market shares of diesel and petrol cars. This political decision inadvertently led to a resurgence of classic combustion engines (see the blue curve in Fig. 2 from 2022 onwards), ironically pushed by a party that aimed for the opposite. The halt of the premium was politically motivated to portray plug-in hybrids as a sham for electromobility.
New car buyers are highly sensitive to prices and political statements. The clear decline wasn't only due to the end of the premium but also the argument that plug-in hybrids would be less desirable in the long term in Germany. Buyers react to such signals because choosing a specific drive type has long-term implications for the vehicle's value and resale price.
3. Politically Induced End of the Electric Car Boom
Both drive types—plug-in hybrid and BEV—represented the shift in drive and mobility in Germany. In 2022, they achieved a market share of 31.4% (17.7% + 13.7%) within the regulatory framework. Electromobility seemed to find a new home in Germany, with growing enthusiasm among new car buyers. Infrastructure issues like public charging stations were not a concern, as the strategy mirrored Tesla’s approach with emotionally appealing cars, superchargers on highways, and good price-performance ratios. The trend continued until the environmental premiums were gradually phased out by the current government.
Market Shares of Hybrid and Electric Cars in New Passenger Car Sales in Germany
However, it wasn’t just the environmental premiums that made electric cars less attractive to new car buyers. Recently, in October 2023, EU Commission President Ursula von der Leyen publicly announced a review of the planned combustion engine ban for 2035 in the EU. This "rescue of the combustion engine" became the industrial policy slogan for several conservative parties, realizing that saving the combustion engine could win voter support. Consequently, synthetic fuels were widely discussed as an alternative, despite the lack of reliable facts from the production and cost sides.
The effect on car buyers was significant. In the first half of 2024, the market share of electric cars dropped to 18.6%. It will take time to regain the 31% share achieved in 2022. We estimated how long it would take with the following simulation.
4. Germany Loses More Than 5 Years in Electromobility
The main reason for the decline in electric car sales in Germany is the high price of BEVs and PHEVs. If the price gap between combustion engines and electric cars can be reduced, important conditions will be met to "get the car moving again." From a political standpoint, Economics Minister Habeck is trying to address this with depreciation relief for electric cars. Shorter depreciation periods, as planned, will affect purchasing decisions for company cars, but the impact is limited. This measure has been used frequently in the past, usually when the federal budget’s spending side was limited. Faster depreciation means greater tax savings for companies, but these immediate tax savings are partially offset upon resale of the vehicles—i.e., in the used car market—where gains from the resale are taxable.
4.1 Assumption: Annual Growth of 10% in Company Cars Through Depreciation
In a simulation (Fig. 4.1), we estimated this depreciation effect, assuming a very positive reaction from corporate customers. The assumption is that annual market share of electric drives for company cars would improve by 10% with depreciation relief—a very optimistic assumption.
For PHEVs, around 65% of sales are to corporate customers. Registrations for car dealers were excluded since these vehicles quickly enter the used car market, predominantly bought by private individuals.
The simulation in Fig. 4.1 shows that even by 2030, the "old" level of 2022 is not significantly exceeded. Thus, faster depreciation does not solve our ramp-up problem.
Market Share Development with Pure Depreciation Effect
4.2 Price Effect on Electric Cars + Depreciation
In the electric car market, an additional effect is crucial: the industrial price development of electric cars. Prices are converging, but not rapidly—more at a snail’s pace. Several factors are important for this assessment:
- Chinese Electric Cars in Europe: Chinese electric car manufacturers could significantly influence price development, both through imports and activities like CKD (Complete Knock Down) with Leapmotor and Stellantis in Tichy or BYD's factory construction in Turkey. However, EU Commission customs decisions counteract imports, slowing down price convergence between electric and combustion cars. Building distribution systems and brand recognition for Chinese manufacturers in Germany takes time, leading to moderate sales growth projections.
- Batteries Prices Plummet: Due to weak demand for electric cars in Europe and the US, there is a significant surplus in battery materials and prices. Lithium-ion iron phosphate cell prices have dropped by about 40% in the last nine months.
- Poor Capacity Utilization by Car Manufacturers: There are significant overcapacities in electric car production. Tesla, for example, has the capacity for 2.4 million vehicles per year but is expected to sell around 1.6 million this year. VW also has significant overcapacities in its Zwickau plant, leading to price concessions.
- Regulation, CO2 Emissions from New Cars: Stricter CO2 regulations for new cars will come into effect in the EU in 2025. To meet these requirements and avoid fines, higher electric car sales are needed, prompting price concessions.
- New Electric Car Models with Better Price-Performance Ratio: The model range and vehicle features, such as range, are continuously improving in electric cars, adding to the pricing pressure.
Simulation Assumptions
For our simulation, we assume an annual 10% increase in electric car penetration due to price pressure and new models, based on the above arguments. This summarizes the simulation results, considering both depreciation improvement and the price effect.
Conclusion: Even with these very optimistic assumptions for the development of electromobility in Germany, there is a gap of more than 5 years from the last peak in 2022 to 2028 or 2027. Germany is losing ground in this crucial future mobility topic, largely due to contradictory political decisions and discussions.
Depreciation + Price Effect
The Data
Year Petrol Diesel PHEV BEV Others: (Mild and Full) Hybrid + Gas
2014 50.5% 47.8% 0.0% 0.3% 1.4%
2015 50.3% 48.0% 0.0% 0.4% 1.4%
2016 52.1% 45.9% 0.4% 0.3% 1.2%
2017 57.7% 38.8% 0.9% 0.7% 1.8%
2018 62.4% 32.3% 0.9% 1.0% 3.3%
2019
