With the victory of the center-right Christian Democratic Union-Christian Social Union (CDU-CSU) alliance in the German federal parliamentary election, the launch of a new coalition government is expected as early as the end of April, but analysis suggests the impact on electric vehicles (EVs) will be limited.
On the 25th, Hyunwook Lee, a researcher at IBK Investment & Securities, stated, "Currently, the biggest issues in Germany are the economy and immigration, so it is more likely that economic stimulus policies will be announced proactively rather than policies specifically targeting the EV industry."
In the German general election held on the 23rd, the CDU-CSU alliance recorded 28.5% of the vote. Following them were the far-right party AfD (Alternative for Germany) with 20.8%, and the Social Democratic Party (SPD) led by current Chancellor Olaf Scholz with 16.4%. Accordingly, a grand coalition centered on the CDU-CSU alliance with Friedrich Merz as the next chancellor is expected to be launched as early as April.
Lee said, "To pass legislation in the German Bundestag, a majority vote is required, so forming a coalition is essential," and predicted, "The CDU-CSU alliance (208 seats) and the SPD (120 seats) together hold 328 seats, exceeding the majority threshold of 315 seats, making government formation through a grand coalition likely."
He also noted, "The CDU has maintained a stance opposing the European Union's ban on internal combustion engine vehicle sales, which raised concerns," but added, "Since a coalition with the SPD is inevitable, policy proposals negatively affecting EVs will be limited." He further stated, "Mainstream parties including the CDU-CSU alliance have declared they will not form a coalition with the far-right AfD, so a return to internal combustion engines will not be easy."
There is also a prospect that the so-called 'debt brake' may be relaxed with the launch of the new coalition government. The debt brake is a regulation limiting the government's fiscal deficit to within 0.35% of the gross domestic product (GDP), and it is linked to various fiscal stimulus policies including EV subsidies. Lee explained, "The SPD and the Green Party support relaxation, while the CDU-CSU alliance and the Free Democratic Party have maintained opposition, but there is a possibility of slight relaxation due to the need for economic stimulus policies."
Previously, the German government abruptly suspended EV purchase subsidies due to budget shortages and restricted additional fiscal spending under the debt brake provision. Lee said, "Then, in September 2024, the EV subsidy policy was revived in the form of a tax credit," and evaluated, "The actual EV sales volume in Germany was 162,000 units as of the fourth quarter of last year, falling short of the previous year's level, so the revival of EV subsidies is essential to boost EV demand."
Germany recorded the highest market share in Europe with 2.82 million new car sales (21.7%) and 570,000 EV sales (19.4%), respectively.
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