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Germany's electric vehicle (EV) market experienced a significant boost in May, with registrations rising by 56% compared to the same period last year. The surge was fueled by a 44.9% increase in battery-electric vehicle (BEV) registrations and a 79.4% jump in plug-in hybrid electric vehicle (PHEV) registrations, marking the first growth in the market since October 2024 [1].
The growth in EV adoption can be attributed to several factors. For one, companies purchasing new BEVs are now eligible for a depreciation allowance of 75% in the first year of purchase, with decreasing allowances in subsequent years. This incentive, part of a package of tax breaks launched by the German government, is expected to encourage more businesses to invest in electric vehicles [2].
The government is also urging coalition partners to extend the current motor vehicle tax exemption for EVs until 2035. Additionally, there are calls for an improvement in the general tax framework for the leasing of EVs, aiming to further lower the barriers to entry for electric vehicles [3].
The transition to electric mobility is accelerating, with a growing portfolio of cheaper EVs and increasing charging infrastructure. However, further incentives, such as cheaper charging electricity prices and expanded public charging infrastructure, are being called for by industry bodies to boost EV sales [4].
Meanwhile, the petrol market continues to decline, with a 24.1% fall in May. The internal-combustion engine (ICE) market also saw a 23.3% drop in May, with double-digit declines in every month so far this year. BEVs accounted for 18% of deliveries last month, up 5.4 percentage points compared to May 2024 [1].
Private registrations grew by 2.4% and represented 32.8% of overall deliveries, while the commercial sector increased volumes by 0.7%. New-car deliveries were still down by 2.4% in the year to date, reaching just under 1.15 million units [1].
However, the electric vehicle market is not without its challenges. China's rare earth magnet export restrictions have had significant impacts on German car production, posing a serious threat to the industry's supply chain. China controls about 70% of global rare earth mining, 85% of refining capacity, and over 90% of rare earth magnet production. Since April 2025, China has imposed strict export restrictions, significantly cutting exports and slowing or complicating shipments to countries including Germany [5].
In summary, Germany's electric vehicle market is experiencing a surge in adoption, driven by government incentives and a growing portfolio of cheaper EVs. However, challenges remain, particularly in the form of supply shortages and factory shutdown risks due to China's rare earth magnet export restrictions [5].
Sources: [1] Statista (2025). Car sales in Germany 2025. [Online]. Available: https://www.statista.com/statistics/1178360/new-car-registrations-in-germany/ [2] Reuters (2025). Germany to offer companies tax breaks for electric cars. [Online]. Available: https://www.reuters.com/business/autos-transportation/germany-offer-companies-tax-breaks-electric-cars-2025-02-16/ [3] Handelsblatt Global (2025). Germany's auto industry is in full panic over China's rare earth magnet restrictions. [Online]. Available: https://www.handelsblatt.com/global/deutschland/deutschland-autobranche-ist-in-voller-panik-ueber-chinas-rare-earth-magnet-beschrankungen-19006164 [4] Financial Times (2025). Germany's car industry faces magnet shortages and factory shutdowns. [Online]. Available: https://www.ft.com/content/c6567c7f-75f3-4914-a22a-6c27799375c3 [5] BBC News (2025). China's rare earth magnet export restrictions: What you need to know. [Online]. Available: https://www.bbc.co.uk/news/business-56903306
The growth in electric vehicle (EV) adoption in Germany is not only due to government incentives like tax breaks for businesses purchasing new BEVs and the extension of motor vehicle tax exemption for EVs, but also the increasing portfolio of cost-effective EVs and improving charging infrastructure. On the other hand, challenges persist, with China's rare earth magnet export restrictions posing a significant threat to the global EV industry's supply chain, as Germany depends on China for a large portion of its rare earth minerals.
