The purchase of battery-powered electric vehicles is currently the best option to benefit both our lungs and the climate, but some wallets have better options.
The costs are even higher for those on a tight budget who rely on a car for daily transportation. Lower-income people can transition to battery-electric vehicles (BEVs) if something is done in the short term.
The Driven reports that the market for BEVs is overgrowing in Germany and France, Europe’s two largest passenger car markets by new sales, with new registrations achieving 18% and 13%, respectively, in 2022.
However, low-cost BEV models are still uncommon in comparison to ICEVs. A new battery electric Dacia Spring, a small car in the lower price segment, remains out of reach for many—its price tag is roughly equal to the median yearly disposable income per capita in Germany (around €23,000) and France (around €20,000).
Both countries have made significant efforts to make BEVs more affordable in general, with various tax and purchase incentives.
When creating national income-based policies for BEVs, it is vital to consider three key factors: how purchase incentives are defined with income levels, the price cap on vehicles eligible for a purchase incentive, and what type of vehicle is qualified, such as a new or used model.
BEVs can be more affordable for low-income people by supporting leasing options like France’s planned social leasing program.
New BEV incentives based on income
The highest subsidy amounts and eligibility requirements differ slightly when purchasing a new BEV in Germany or France.
In Germany, all private buyers get the same amount of assistance regardless of income. The government’s one-time purchase bonus is worth up to €4,500. Any buyer can receive up to €6,750 if the automakers contribute €2,250 (net).
In France, however, there is a distinction between lower and higher-income households. Individuals earning up to €14,089 (annual per capita reference tax income) are eligible for a purchase bonus of up to €7,000, while those earning more than this amount are eligible for a maximum aid of €5,000.
The highest possible aid amount in France is 27% of the vehicle’s gross purchase price.
As illustrated in Figure 1, lowering the purchase price of a Dacia Spring by only applying the national and manufacturer’s purchase bonuses results in an identical final price tag with less than a €400 difference—around €15,600 in Germany and €15,200 in France for people with lower incomes.
In France, the maximum bonus is not available for the comparably low-cost BEV model.
Used BEV incentives based on income
Used BEV purchases may be even more attractive if government policies target low-income drivers. Because they are less expensive than new models, these vehicles are frequently the first choice for lower-income people. Germany and France offer purchase incentives for used BEVs but are not income-based.
Germany’s government offers a €3,000 purchase incentive for a pre-owned BEV, and manufacturers add another €1,500.
Although the German bonus seems substantial, several requirements must be satisfied. A new purchase bonus, for example, cannot have already been applied to the vehicle, and the BEV can only be registered for a maximum of 12 months and have a maximum mileage of 15,000 km.
A used BEV purchase bonus in France is €1,000. To qualify, the vehicle must be at least two years old from the first registration, purchased from a dealer, and kept for at least two years. The used BEV bonus can only be given once every three years.
Although neither France nor Germany has implemented a purchase incentive for used BEVs based on income, other countries such as the United States and California have such laws.
Vehicle price caps on BEV incentives for new and used purchases
Putting price caps on BEVs eligible for purchase incentives can help avoid giving money to people who can afford a new, expensive car.
If the new BEV’s net list price is below €40,000, the German government will pay the maximum bonus amount of €4,500; if it is between €40,000 and €65,00, the bonus will be reduced to €3,000.
The price cap for purchasing a used BEV is €65,000. Only new BEV purchases under €47,000 in France are eligible for the bonus, and there is no price cap on used BEV purchases.
BEV leasing income-based incentives
To reduce BEV purchase costs, leasing may be a good option. Germany’s BEV leasing bonuses depend on the vehicle’s net list price, whether it’s new or used, and the leasing duration. New and used BEV leases in France receive the same bonus as purchases.
Lower-income people can benefit from income-based leasing. France’s new “social BEV leasing program” will allow “those who need it most” to lease a BEV for €100 per month.
Yet, additional information on vehicle eligibility or lease duration will be available.
After an initial €2,500 contribution and the €5,000 purchase bonus, a new Dacia Spring Essential can be rented for €120 per month for 37 months in France. A 36-month Peugeot e-208 rental costs €150 per month. Germany has no similar plan.
Income-based incentives for low-emission cars
Other income-based policies in France support the purchase of BEVs and low-emission ICEVs. A national income-based conversion bonus backs replacing an older car with a cleaner zero- or low-emission version, and the clean vehicle microcredit allows low-income people to rent or buy a new or used zero- or low-emission car.
Bonus-malus vehicle taxation
France’s 2008 bonus-malus tax scheme guarantees that the wealthiest pay the malus.
High-income buyers of new high-emitting vehicles pay a higher one-time registration tax at purchase; starting in 2023, the cap will be €50,000 for vehicles emitting 225 g CO2/km (based on WLTP) or more.
The funds have previously been used to finance bonus payments for both BEVs and plug-in hybrid vehicles and partially fund the conversion bonus. Germany does not have a bonus-malus tax scheme, and all taxpayers indirectly pay for purchase bonuses.
France and Germany are making significant efforts through national policy actions to make BEVs accessible for lower-income people.
Germany may face a split transition to BEVs, making it harder for people with lower incomes who rely on a car daily to access BEVs.
Keeping them can aid in the crucial technological transformation required to meet our climate targets while reducing air pollution and health risks.
See Also
- Hyundai BEV sales reach new heights in June 2023, Ioniq 5 and Ioniq 6 lead the charge
- Tesla Model Y receives Residual Value Award in European BEV SUV category
- US: BEV registrations almost hit 350,000 units from Jan to Apr 2023
- NIO global BEV sales dropped 12% in May 2023
- Hyundai BEV sales grew 78% YoY in May 2023 in the US
