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Headline: Electric Vehicle Sales Boom in Germany and UK, While US Tariffs Pose Challenges for Carmakers
The German new-car market experienced a significant surge in July 2025, recording double-digit year-on-year growth for the first time since April 2024. A total of 264,802 models were registered, marking a 11.1% increase [1]. This growth can be attributed, in part, to incentives that have positively impacted new-car registrations in both Germany and the UK.
In the UK, the government's electric car grant scheme offers up to £3,750 off new electric vehicles (EVs), aiming to make them more affordable [2]. Eligibility for the grant is tied to brands meeting strict emissions reduction targets, and the scheme applies to many models including Volkswagen, Cupra, Peugeot, Nissan, and others. Volkswagen Group recently introduced a £1,500 "Grant Guarantee" on EVs to provide price certainty amid uncertainty about official grants, helping to boost consumer interest and registrations [1].
As a result, UK electric car sales have reached 21.6% of all new car sales so far in 2025 [3]. This growth is supported by government policies like the grant, salary sacrifice schemes, and manufacturer mandates such as the Zero Emission Vehicle Mandate. Europe's overall EV registrations surged 28% in Q1 2025, with battery-electric vehicles (BEVs) making significant gains even as overall new-car registrations declined [4].
Germany, like the UK, supports EV adoption through a mix of fiscal incentives and carbon reduction mandates driven by the EU [3][4]. Both countries’ policies combine consumer incentives and manufacturer targets to accelerate the transition from petrol/diesel cars to electric alternatives.
However, US tariffs have created financial pressures on some carmakers. Although the specific financial impact of US tariffs is not fully detailed, it is noted that they raise import costs, potentially squeezing margins and affecting financial results, especially for companies reliant on cross-border supply chains or exports to the US [5]. This may create added challenges for manufacturers trying to maintain competitive pricing amidst incentive-driven price pressures in European markets.
For instance, General Motors expects the tariff situation to worsen in the third quarter and has committed to previous estimates that trade headwinds will hit its bottom line by up to $5 billion this year [6]. Similarly, Ford now anticipates full-year adjusted EBIT of $6.5 billion to $7.5 billion, which includes a net tariff-related headwind of around $2 billion [7].
In contrast, the UK government introduced incentives for BEV purchases in July 2025, offering £3,750 for the most sustainable models and £1,500 for those with lower green credentials [8]. However, these incentives did not impact UK registrations in July 2025, which were down by 5% year on year. BEV deliveries grew by 9.1% in July 2025, but this was their second-smallest improvement so far in 2025 [9].
In Germany, BEV registrations rose by 58% in July 2025, capturing an 18.4% share of the market, up from a 12.9% market hold in July 2024 [10]. Despite the positive growth, there are still challenges for manufacturers to achieve the maximum discount amount under the incentive scheme [11].
In summary, incentives in Germany and the UK are driving up EV registrations by reducing consumer costs and enforcing stricter manufacturer emissions targets, while US tariffs exert upward cost pressures on carmakers that can negatively affect their financial performance [1][2][3][4][5].
References: 1. BBC News 2. Government Grant Scheme 3. European EV Sales 4. EV-Volumes Quarterly Report Q1 2025 5. CNBC 6. General Motors Q2 2025 Earnings Release 7. Ford Q2 2025 Earnings Release 8. UK Government Incentives for BEVs 9. SMMT UK Registrations July 2025 10. KBA Germany Registrations July 2025 11. Cupra Grant Eligibility
- The surge in electric vehicle (EV) sales in Germany and the UK can be attributed to incentives that not only reduce consumer costs, but also enforce stricter emissions targets for car manufacturers in the automotive industry.
- Technology plays a crucial role in this shift as advancements in EV battery technology contribute to the growing affordability of EVs and their increased appeal to consumers in the financial sector.
- Despite the positive growth in EV sales, US tariffs pose challenges for carmakers in the transportation industry, as they exert upward cost pressures that can negatively impact their financial performance and competitiveness in global markets.
