Phasing Out Green Subsidies: Evidence from the Sudden Stop of Federal EV Subsidies in Germany

Governments that rely on purchase subsidies to accelerate electric vehicle (EV) adoption must eventually phase them out. What happens to EV sales after a phase-out? There are two competing logics: A static view (removal raises prices, demand falls) and a dynamic view (announced cuts pull purchases forward, yielding a spike followed by a dip). I test these mechanisms in Germany’s Umweltbonus case, which saw an announced reduction (signaled July 2022, effective January 2023) and a sudden termination (signaled December 16, 2023, effective December 17, 2023). Using three synthetic-control estimators, I find that average post-phase-out effects are small and statistically insignificant across episodes. For the announcement episode, a pronounced December 2022 surge offsets modest declines in EV sales in early 2023. This is consistent with the dynamic view. For the sudden termination, aggregate nulls suggest limited price sensitivity among recipients, who are mostly high income individuals. This aligns with evidence from car model- and maker-level panels which reveal significant declines only for low-cost vehicles, but not for other segments. The policy implications of this is study are that well-signaled phase-outs can boost short-term sales without precipitating collapses, and that targeting matters—withdrawal effects hinge on who receives the subsidy.