New guidelines for the promotion of electric vehicles

On 5 November 2020, the German Federal Ministry for Economic Affairs and Energy (BMWI) announced new guidelines in the German Federal Gazette for promoting sales of electric vehicles (“environmental bonus”). The guidelines will take effect on 16 November 2020, replacing and amending the environmental bonus guidelines which have been in effect since 8 July 2020 (Federal Gazette, official part, 7 July 2020 B2). The objective is to further promote the sales of new and pre-owned nearly-new electric vehicles (BEV, PHEV and FCEV) by means of the environmental bonus agreed as part of the package. The new guidelines will definitely contribute to the achievement of this objective, although there are some drawbacks, especially in the rules newly introduced to promote leasing.

One major change is the easing of the ban on double funding to date under clause 2 of the guidelines. With the application of the new guidelines, the purchase or leasing of a vehicle funded under the guidelines can, in exceptional cases, simultaneously be funded by other public funds if the grantor of such funds has concluded an administrative agreement with the BMWI. From 16 November 2020, the environmental bonus issued by the Federal Office for Economic Affairs and Export Control can be combined with the following incentive schemes:

• the funding scheme “Förderrichtlinien Elektromobilität und Markthochlauf NIP2” from the German Federal Ministry of Transport and Digital Infrastructure (BMVI)
• and the immediate action programme “Saubere Luft” (“Clean Air”) and the fleet exchange programme “Sozial und Mobil” (“Social and Mobile”) from the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU).

In addition, new rules have been introduced regarding the minimum holding period under clause 3 of the guidelines for leasing. A general requirement for funding is that the vehicle must be registered in the applicant’s name for at least 12 months if the lease runs for 12 to 23 months, and for at least 24 months if the lease runs for more than 23 months. In the future, the duration of the lease will be linked to graduated funding under clause 4 of the guidelines. The federal government’s share of the environmental bonus in the form of a non-refundable grant taking into account the innovation premium of €6,000 (€5,500 for PHEV) will be halved if the lease runs for 12 to 23 months (inclusive), and reduced to a quarter if the lease runs for 6 to 11 months (inclusive).

The change mainly concerns leaseholders with short-term contracts who have already advanced the full amount of the grant as a special payment to the lessor, but not yet received payment of the environmental bonus, as the vehicle has not yet been delivered or registered. The situation is similar for dealers intending to sell pre-owned vehicles after a lease term of less than 24 months, as they are still required to apply the controversial blanket 20% value write-down, essentially granting this as a discount. As a general rule, the grantor of the funds may change the administrative rules for the use of funds from the budget at its discretion. Legal reviews only take place within narrow limits, and they are essentially limited to checking there is no arbitrariness, based on the equality principle under Article 3(1) of the German Basic Law (Grundgesetz – GG) (see for example German Federal Administrative Court (BVerwG), judgment of 8 April 1977, 3 C 6/95; most recently Würzburg Administrative Court (VG), judgment of 13 January 2020, W 8 K 19.364).

Finally, the rules on securing contributions from the automotive industry have been streamlined significantly. Now the federal government’s share of the environmental bonus will be paid only if the net purchase price (excluding VAT) for end customers is reduced by at least the manufacturer’s share of the environmental bonus. The reduction must be evident from the sales invoice or the leasing agreement, which have to be produced when making the application.