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Germany plans to slash EV subsidies in 2023, Tesla promises to make up the difference

The German government’s subsidies for electric vehicles are expected to be reduced next year, which will be bad news for Tesla customers. However, Tesla has promised to compensate certain customers to make up for the shortfall from reduced government subsidies.

Demand for the Model 3 and Model Y in Germany is so strong that some orders may not be fulfilled until 2023. So even if the cars are ordered today, some customers may end up waiting until 2023 to receive their cars, when the German government’s electric vehicle subsidy policy will have been adjusted.

But Tesla has already come up with a plan to deal with that. The company’s Model Y reservation holders in Germany have been notified that Model Y customers who can’t pick up their cars by the end of the year will still receive the current German government subsidies for electric cars, but Tesla will pay for the difference directly.

Tesla said in the notice that the company will be responsible for making up the difference between Germany’s current subsidy and next year’s adjusted subsidy, which is valid for orders placed through Dec. 31, 2022.

The notice reads.

"Due to high demand for deliveries this year, if your Model 3 or Model Y delivery cannot be completed in 2022 and you meet the conditions to qualify for this reimbursement, we will reimburse you for the difference in subsidy in 2023. To qualify for reimbursement, order your Model 3 or Model Y by December 31, 2022."

In 2023, the environmental dividend will be reduced. We want to make sure you benefit from the high subsidy for the Model 3, even if you don't receive your vehicle until 2023 because demand is high this year. If you qualify for compensation, we'll also pay the difference between the subsidy in 2022 and 2023. Right now, you don't need to do anything else."

Germany is one of the most important auto markets in Europe, and it is difficult for foreign automakers to break into this market because Germany has many strong local car companies, such as Volkswagen, BMW and Mercedes-Benz. Tesla has made a lot of early efforts in Germany, but now it is expected to better operate its factories there.

Last year, Tesla delivered nearly 40,000 cars in Germany. But on its third-quarter earnings call, Tesla announced its goal to increase sales to 80,000 units by 2022. Considering that Tesla has delivered less than 35,000 vehicles through September and already has the best-selling car in Germany, it still has a long way to go to meet that goal.

However, one factor that may help Tesla’s goal of breaking its fourth quarter delivery record in Germany is that starting next year, Germany will significantly reduce subsidies for electric cars starting at less than €40,000, from €6,000 to €4,500, and from €5,000 to €3,000 for electric cars starting at more than €40,000.

Typically, the reduction or elimination of electric vehicle subsidies on the eve of a vehicle purchase prompts more people to buy the vehicle, which is part of the reason Tesla believes it can deliver more than 40,000 vehicles in Germany in the fourth quarter.

Lately, Tesla’s performance in Germany has been impressive. Just recently, the company introduced two new paints for the Model Y produced at its Berlin plant, called Quicksilver and Midnight Cherry Red, effectively replacing Red Multi-Coat and Midnight Silver Metallic, and both paints are more affordable.

Demand for the new color of the Model Y appears to be strong, and the wait for the Midnight Cherry Red version of the Model Y has been pushed back to July 2023 at the earliest, according to reports. Recent photos of the Berlin factory complex also show that the facility’s battery production building appears to be nearing completion.

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