Germany faces energy tax losses as EV sales rise

Germany is facing potential energy tax losses as electric vehicle (EV) sales surge, according to tax and transportation expert Jens Boysen-Hogrefe of the Kiel Institute for the World Economy. EV sales in Europe increased by nearly 30% in the first quarter of 2025 compared to the same period last year. Norway boasts an impressive 95% electric car market share, while Asia-Pacific countries and Latin America saw growth rates of up to 80% and 75% respectively.

In Berlin, the financial sector is not as enthusiastic about the electric vehicle boom, as charging EVs does not incur energy taxes, only minimal electricity taxes. Fossil fuel taxes and value-added tax make up more than half of the pump price, benefiting the government significantly. The federal government could face billions in losses if the transition to EVs continues without adjustments to the tax system, Boysen-Hogrefe predicts.

The current energy tax revenue on diesel and gasoline has dropped from €37 billion in 2016 to €33 billion last year, with projections of further decline to as low as €5 billion by 2050. Despite scrapping government incentives for EV purchases in 2023, Germany continues to offer tax benefits for electric vehicles and companies investing in them.

Experts advise the government to address the fiscal implications of the EV transition proactively, suggesting options such as a passenger car toll, vignette system, or raising the motor vehicle tax. Other countries, like the UK, Norway, New Zealand, Iceland, and Switzerland, have implemented measures to address the new situation, including levies, annual odometer checks, and weight-based fees.