Germany, the EU’s bellwether economy with the gravitational pull of a black hole, is struggling to sell electric cars. It is a sign of a deepening economic decline. Germany’s electric vehicle market plummeted in July, extending a sharp decline since government incentives were scrapped late last year. Registrations of battery-powered cars fell by 37% compared to the previous year, according to data from the Federal Motor Transport Authority (KBA). This marks the steepest drop since the subsidy cuts took effect in December.

In contrast, sales of traditional combustion engine vehicles rose by 7%. The downturn in EV sales is undermining automakers’ plans to transition to electric models and highlights the crucial role of government support in driving EV adoption.

The broader European market is experiencing a similar slowdown in EV sales wherever incentives have been phased out, leaving manufacturers like Volkswagen unprepared and the overall shift to electric mobility stumbling.

EV sales in Germany plunged to just under 13% of the market in July, a steep drop from 20% the previous year, according to EY. This unexpected slump has caught automakers off guard, forcing companies like Volkswagen to adjust production plans and potentially delay battery scaling.

The broader economic outlook for Germany’s automotive industry is also darkening. A recent survey indicates declining business confidence as EV sales falter. With stricter EU emissions regulations looming, automakers face a challenging path to meet targets while navigating a sluggish market.