Germany

Last modification: 3 Oct 19
Introduction: 

Germany has the largest economy in Europe and the fourth- or fifth-largest in the world, depending on whether you use nominal GDP ($4.02 trillion, 2018) or GDP (PPP) ($4.38 trillion, 2018) respectively. In 2017, Germany accounted for 28% of the economy in the eurozone.

Germany is ‘car country’: it’s home to a world-leading automobile industry that produces around 6 million cars per annum. One in 15 cars sold worldwide is made in Germany. One in 20 cars worldwide is registered in Germany. The German car industry plays a major role in the country’s economy and has a big impact on the culture – specifically the corporate culture. Company cars (‘Firmenwagen’) are an important element of that culture. 

Source: Car Ownership and Usage Trends in Germany

For payroll tax purposes, the private use of company cars is considered a benefit in kind (BIK). The value of the BIK is calculated based on a driver's logbook of business and private journeys (the logbook comes with strict requirements for acceptance). Alternatively, the BIK can be calculated via a simplified method that equates the monthly BIK with 1% of the car's list price. The amount thus calculated via the '1% rule' is considered to represent the value of the car's private use per month. This amount is subject to income tax and social security contributions.

Other important fiscal topics:

– recharging EV batteries at the workplace is exempt from payroll tax;

– From 1 September, WLTP-based figures are being used to calculate CO2-based vehicle emission taxes. The trend is upwards, but with carbon taxes at €2 per gram over 95G/km, the impact is minimal.

Chapter 1: Economic and business environment

Demographics

82.4 million (2019 estimate)

Source: World Population Review

Capital

Berlin (3.4 million inhabitants)

Source: World Population Review

Major cities

Berlin, Hamburg (1.8 million), Munich (1.3 million), Cologne (1 million), Frankfurt am Main (672,000), Stuttgart (600,000), Düsseldorf (586,000), Dortmund (581,000), Essen (576,000), Bremen (548,000)

Source: World Population Review

Languages

German

GDP

$44,659 per capita (2018)

Source: countryeconomy.com

Unemployment rate

3.3% (Nov. 2018)

Source: Eurostat

Main industries

Technology, automotive, telecommunications, services, agriculture, chemical industry, transport, metallurgy.

The economy is dominated by a few large companies, but 99% of all companies are SMEs, often family-owned. This is the so-called Mittelstand. It is considered the backbone of the German economy. 

Currency

Euro

Interest rate

-0.88% (Jan. 2018)

Source: basissinzsatz.de

Fleet Maturity Index (scaling)

5/5

Political key info

Germany is a democratic, federal parliamentary republic, and federal legislative power is vested in the Bundestag (the parliament of Germany) and the Bundesrat (the representative body of the Länder, Germany's regional states).

There is a multi-party system that, since 1949, has been dominated by the Christian Democratic Union (CDU) and the Social Democratic Party of Germany (SPD). Angela Merkel has been serving as Chancellor of Germany since 2005 and leader of the centre-right Christian Democratic Union (CDU) since 2000.

In domestic policy, health care reform, problems concerning future energy development and more recently her government's approach to the ongoing migrant crisis have been major issues during her Chancellorship. At the end of 2018, Ms Merkel announced that she would not seek reelection in 2021 and appointed Annegret Kramp-Karrenbauer as her successor as CDU party leader – and presumptive candidate for the Chancellorship.

Source: The Guardian

Inflation

1.7% (Dec. 2018)

Source: inflation.eu

Chapter 2 : Automotive market, segments & sales

Total Car park

46.5 million passenger cars (Jan. 2018), of which 64.5% German brands.

Source: KBA

The most popular vehicle types in 2018:

  • Compacts: 22%
  • SUVs: 18.3% (+20.8%, strongest growing segment)
  • Small cars: 14.5%
  • Midsize cars: 10.9%

The most popular vehicle colours in 2018:

  • Grey: 29.5%
  • Black: 24.8%
  • White: 20.9%

Source: KBA

German car market at the end of August 2019:

The German car market was up in July (+4.7%) and slightly down in August (-0.8%), resulting in a year-to-date gain for the first eight months of the year of +0.9% - corresponding to just under 2.5 million new cars registered. 

  • SUV sales in August were up 10% to 32.3% of the total
  • C-segment cars (compact sedans) were down 11.6% to just 18.9% of the total. 

Source: AutoActu

 

New vehicle registrations (Cars, LCV, Trucks)

Compared to 2017, Germany's total motorised vehicle market expanded by +0.6% to 4,025,514 units last year, thanks mainly to increases in motorcycle and heavy-vehicle sales. Germany's new-car market, despite exceeding 3 million for the fifth year in a row, contracted slightly. This was attributed to the negative effects of the new WLTP regulations, introduced in September 2018. 

For 2019, the ZDK (German Federation for Motor Trades and Repairs) expects a similar volume of new car registrations as in 2018: about 3.4 million.

Source: Autovista

Due to WLTP, registrations went down as carmakers like Renault, Volkswagen and Audi struggled to get vehicles type-approved. The numbers suggest people preferred to wait for cars to become available rather than switching to other OEMs. Experts expect a catch-up effect in the first months of 2019 of around 30,000 additional registrations.

  • Cars (PKWs): 3,435,778 (-0.2%)
  • Trucks (LKWs): 321,966 (+5%)
  • Motorcycles: 158,258 (+10%)
  • Buses: 6,687 (-0.1%)
  • Tractors: 82,923 (-2.9%)

Source: Car Sales Statistics

Top 5 brands (total market)

1. Volkswagen (643,518 new registrations in 2018)
2. Mercedes (319,163)
3. BMW (265,051)
4. Audi (255,300)
5. Ford (252,323)

Source: Statista

 

Market share per brand, August 2019 and year-to-date

  • The fall of VW sales accelerated, from -7% in July to -17% in August. The brand’s year-to-date market share for the first eight months was 18.4% (-6.7%).
  • Mercedes sales were up 22%, both in July and August. The year-to-date market share was 8.9% (+4.5%).
  • Top 3 to 10 year-to-date market shares: Audi (8.1%, -5%), Ford (7.7%, +10.4%), BMW (7.3%, +9%), Opel (6.3%, +2.1%), Skoda (5.9%, +3.8%), Seat (4.1%, +10.4%) and Renault (3.7%)
  • Other good year-to-date performances outside the top 10 but above 2% market share: Hyundai (+9,5%), Dacia (+7,5%), Fiat (+6,4%) and Peugeot (+6,2%)

Source: AutoActu

Model preference top 5 (total market)

1. Volkswagen Golf (211.512 new registrations in 2018)
2. Volkswagen Tiguan (74.749)
3. Volkswagen Polo (70.488)
4. Volkswagen Passat (70.007)
5. Mercedes C-Class (62.784)

Source: Handelsblatt

Used car market/renewal cycle

The average age of the car park is 9.4 years.

Source: KBA

In 2018, about 7.19 million used cars were sold in Germany, down 1.5% compared to 2017. That slight decline is expected to continue in 2019. 

Source: KBA, Autovista

 

  • Diesel RVs will continue to decline slightly but will stabilise over the course of the year. 
  • Petrol RVs will not continue to rise but will remain stable due to the weakening used car demand and less oversupply. 
  • RVs for alternative fuel vehicles - especially hybrids - will grow slightly as the supply and demand situation is still advantageous. 
  • OEM and dealership registrations of new B and C segment cars will grow and apply further pressure on RVs as supply increases. The daily remarketing business of dealerships will therefore be dominated by smaller vehicles with lower diesel penetration.

Source: Autovista

Chapter 3: Company car market

Total Fleet Park (company cars)/Fleet penetration in total fleet sales

Around 4.5 million cars and LCVs were used as corporate vehicles in Germany in 2017. That's about 10% of the total vehicle park in Germany. 

There are about 1.6 million corporate fleets in Germany, of which about 16,000 consist of 20 or more vehicles.

Source: VMF 

Of the 3.44 million new vehicles registered in Germany in 2018, 63.6% (-1.3%) were for corporate fleets, 36.4% (+2%) for private consumers.

Source: KBA

Evolution fleet sales (last 5 years)

2014   +9.5%
2015   +9.9%
2016   +5.3%
2017   +2.1%
2018    -3.2%

The decline was attributed to the introduction of WLTP from September. It should also be put in perspective: 2017 was a record year, the fleet channel marked up 800,000 units for only the third year ever, and Germany beat the UK as the biggest fleet market for the first time since 2012. 

Source: Dataforce

Top 5 fleet brands (fleet market)

1. VW
2. BMW
3. Mercedes
4. Audi
5. Ford

(December 2018)

Source: KBA

 

Leasing ratio

The leasing ratios of Germany’s most popular fleet brands varies strongly:

1. BMW: 67%
2. Audi: 66%
3. SEAT: 65%
4. Skoda: 62%
5. Volkswagen: 60%
6. Mercedes: 56%
7. Opel: 52%
8. Ford: 50%
9. Renault: 49%
10. Toyota: 39%

(i.e. 67% of all BMWs in fleets are leased, but only 39% of Toyota’s fleet customers resort to leasing).

Source: Dataforce
 

Fleet Model preference top 5 (fleet market)

1. VW Polo
2. Ford Fiesta
3. Opel Corsa
4. Skoda Fabia
5. Mini One/Cooper

(full-year 2018)

Source: Dataforce

Leasing ratio

The leasing ratios of Germany’s most popular fleet models varies strongly, from 50% for the Opel Astra to 70% for the Audi A4. The vehicle segment and premium factor can only partially explain these differences. The Skoda Octavia is leased more frequently than the Mercedes E-Class, SEAT more often than Ford or Opel. The PSA subsidiary, on the other hand, has the highest leasing share in small fleets in the top 10 brands.

Source: Dataforce
 

Chapter 4: Taxation & legislation

The German government levies various taxes and other charges on motoring, such as:

  • motor vehicle tax (Kraftfahrzeugsteuer) but also 
  • VAT (Umsatzsteuer) and excise duties on the purchase of a car and 
  • indirect taxation on private use of company cars. 

In addition, there are other taxes in Germany directly or indirectly related to the use of vehicles, such as 

  • fuel tax (Energiesteuergesetz) and the 
  • truck toll (LKW Maut).

Registration tax 

There is no tax on the registration of cars in Germany. However, to obtain a number plate, a service charge is levied by the local municipality. The sum should not exceed €100.

Motor vehicle tax

Foreign-registered cars are subject to German motor vehicle tax if they are used in Germany for a period of one year or more.

Car registration is now strictly linked to a control process with the tax authorities, ensuring that the registered owner or user has paid the due taxes. The system of taxation for cars is quite complex, with a number of limited exemptions for cars with lower emissions of harmful substances, and altogether there are over 40 different tax rates which are partly still in place for older vehicles beside the new emissions-based system which is applicable for motor vehicles registered after July 1, 2009. 

From May 1, 2005 onwards it is no longer possible to classify SUVs as commercial vehicles/trucks in order to achieve advantages in car taxation.

The tax incentives granted for the retrofitting of diesel vehicles with fine particle filters have expired on November 5, 2016.

The taxation for motor vehicles registered after July 1, 2009, has changed from a mere engine capacity-based tax to a mixed tax also taking CO2 emissions into account. 

The introduction of a passenger car toll system is still under discussion.

WLTP

From 1 September 2018, WLTP-based figures are being used to calculate CO2-based vehicle emission taxes. The trend is upwards, but with carbon taxes at €2 per gram over 95G/km, the impact is minimal.

Industry experts say the increase in motor vehicle taxation due to WLTP to be between 15 and 25% (or around €50). Increases will be much steeper for some models. 

For the period from 2018 to 2022, the German Ministry of Finance expects the adjusted motor vehicle tax to bring in additional revenue of €1.1 billion in total.

Source: Autozeitung

More info in the TAXATION GUIDE edited by NEXUS COMMUNICATION.

Chapter 5: Car policies

With the increasing number of suppliers, services and new technologies, fleet management has never been this complex. This is prompting an increase in the number of companies turning to external fleet management. The service providers offer cost transparency and standardised processes and, at the same time, are seeing growth in the demand for truly comprehensive services. Many fleet operators not only rely on external services for economic reasons, but also to adequately cover all legal requirements.

With the digitalisation of vehicle fleet data, the company car driver is playing an increasingly important role. In future, the connected car will be an important component of future-facing fleet management. A smart phone will establish the connection between the vehicle and user data and act as a data provider for the fleet operator, making manual recording obsolete. 

Chapter 6: Funding methods

There is a clear positive relationship between company size and operational leasing as the main financing method. 

No less than 62% of the fleets of larger companies (>1000 employees) in 2017 managed under operational leasing. The figure for the previous year was significantly higher, though (65%). 

The reduction is significant because of the large numbers involved. It can be explained by a tendency of large companies to be more flexible in resolving their mobility needs, by increasingly using alternatives to traditional buying or leasing, for example long-term renting and carsharing. Mobility budgets are increasingly popular. One example is the BahnCard 100, which offers prepaid mobility on all public transport offered by rail provider Deutsche Bahn.

Operational leasing is less widespread with smaller companies (<100 employees) but gaining in popularity: the share of leased vehicles in small corporate fleets increased from 41% in 2016 to 44% in 2017. Smaller companies as yet seem less keen to experiment with mobility alternatives. 

Fleshing out the leasing contract with service components is still in vogue, while exclusive leasing on the basis of a pure financial rate is on the decline. According to Dataforce, a service contract is also signed in more than half of the fleets that use leasing (51,3%).

Extensive and transparent services, as well as mobility packages, are in increasing demand. The spotlight is no longer on the purchase price, but rather on the overall costs of mobility, bringing about ever greater convergence between the business travel and vehicle fleet management segments. 

Some of the main providers of corporate mobility on the German market include VW Financial Services, Mercedes-Benz Bank and BMW Bank (three captives) and ALD AutoLeasing (the main non-captive). 

https://www.autohaus.de/nachrichten/dataforce-analyse-leasingmarkt-in-bewegung-2220490.html
 

as the main financing method. Just 34% of small German companies (up to 100 employees) use operational leasing, while almost 58% of large companies (1,000 employees or more) do so.

Fleshing out the leasing contract with service components is still in vogue, while exclusive leasing on the basis of a pure financial rate is on the decline. According to Dataforce, a service contract is also signed in more than half of the fleets that use leasing (51,3%).

Extensive and transparent services as well as mobility packages are in high demand (car-sharing). The spotlight is no longer on the purchase price, but rather on the overall costs of mobility, bringing about ever greater convergence between the business travel and vehicle fleet management segments. 

Source: Autohaus

Chapter 7: Fuel

Fuel type segmentation of total new vehicle registrations in 2018 (compared to 2017)

  • Petrol cars: 62.4% (+4.7%)
  • Diesel cars: 32.3% (-6.5%)
  • Hybrid cars: 3.8% (+53.8%)
  • BEV cars: 1% (+43.9%)
  • PHEV cars: 0.9% (+6.8%)
  • CNG cars: 0.3% (+190.2%)
  • LPG cars: 0.1% (+6%)

Source: KBA

For the full year 2018 in new True Fleet registrations, diesel declined even more significantly (-12.4% vs. 2017) and petrol increased by the almost exact same percentage share (+12.6%). The most popular EV model in German new fleet registrations in 2018 was the Renault Zoë, with the BMW i3 a close second.

Source: Dataforce

Ongoing discussions about diesel bans mean buyers, especially user-choosers with higher leasing instalments as well as progressive self-employed and business owners, will increasingly consider electrified vehicles when choosing a new car. The change in taxation on the private use of a hybrid or electric company car will also support demand. Alternative fuel vehicles will continue to grow volume-wise, with hybrids at a much stronger rate than EVs.

Source: Autovista

The energy mix of new-vehicle sales in Germany in August 2019:

  • Petrol: 61.4% (-2%)
  • Diesel: 30.2% (-8.2%)
  • EVs: 1.6% (+100%)
  • Hybrids: 5% (also strong progress)
  • PHEVs: 1% (-9%, due to the reduction of sales subsidies)

Measured according to the WLTP standard, the average CO2 emission per vehicle of the vehicles sold in August in Germany was 157.6 g/km.


Source: AutoActu

Chapter 8 : TCO components

The current Total Cost of Ownership (TCO) analysis is slowly but surely being replaced by an analysis of the Total Cost of Mobility (TCM), thus reflecting the growing demand for corporate car-sharing and other mobility solutions tailor-made for vehicle fleets. 

The current economic environment offers excellent opportunities for fleet management providers. The generally rising cost pressure means that vehicle fleet budgets are being tested. Fleet operators are wary of spending. 

New systems are being rolled out to support the operation of vehicle fleets, such as the possibility for drivers to conveniently book the vehicles via the intranet and open them by mobile phone, while the driver's licence is checked via an app. 

In future, the connected car will be an important component of future-facing fleet management. A smartphone will establish the connection between the vehicle and user data and act as a data provider for the fleet operator, making manual recording obsolete.

Many fleet operators rely on external services not just for economic reasons but also to adequately cover all legal requirements. 

 
The TCO equation

Depreciation and fuel remain the biggest slices in the average TCO pie in Germany: 

  • Depreciation: 30%
  • Fuel: 25%
  • Maintenance and repair: 13%
  • Financing: 11%
  • Insurance: 7%
  • Tyres: 7%
  • Management: 5 %
  • Taxes and fees: 2% 

Chapter 9: Safety, insurance and telematics

As mobility trends loosen the one-on-one link between car and driver, the question of how to adapt insurance coverage becomes increasingly relevant. Users will want to have the same coverage irrespective of their mode of transport. A special case will be the introduction of autonomous cars, where the question of liability will become very hard to resolve. 

Meanwhile, despite doubts about its viability in the future, the car insurance industry is performing very well: it grew by more than 30% to €26.9 billion over the last seven years. Adjusted for inflation, that's still a total of around 20%, or 3% a year. 

Telematics fees have only limited space in the German insurance market, according to two large reinsurers who see a market share of 3% as realistic. There is a lot of movement in digital claims management: Mercedes has marketed a new A-Class. After the E-Class, it's the OEM's second model with full default built-in connectivity, offering both data collection and transmission. In the near future, vehicle fleets could become the first segment of the car market the insurance or which will be handled completely digitally. 

Fleet can also play a crucial role in the introduction of electric vehicles. The business is still deeply red for insurers. For more than ten years, the combined ratio has been well above 100 percent. Up to 107 percent these are the damage and expense ratios of fleet insurers in the four years from 2014 to 2017. The insurers working in this segment must have a very long breath and consider the fleet insurance as a necessary evil to go to other industrial business. The fleet insurers earned premiums of just under € 3.6 billion for liability and collateral for 2017.

Marc Odinius, who analyses the fleet business with his company Dataforce, pointed to his major role in the change in the car market. Since 2011, the share of diesel vehicles in fleets has dropped from 76% of new registrations to 64% - a key reason for the general drop in the diesel ratio from 48% to 39%, he said. New registrations in the fleet market are breaking one record after another. however, the market continues to write losses. The good economic situation is driving the fleet business.  

The market grew after premiums. Thus, the premiums in 2017 should have increased by 3.6% to €3.61 billion. In terms of revenue, it remains bad. With a fiscal year loss ratio of 95%, fleet risks in the market continue to be inadequate. 

Chapter 10: Environment

In August 2017, Chancellor Merkel said Germany should join other European countries in banning the sale of new fossil-fuel cars but did not want to be pinned down to an exact year. 

Considering the importance of its automotive industry and the size of its market, such a decision would be decisive for the decarbonisation of transport in the whole of the EU, and for the wider world. It would also be necessary for Germany to meet its climate targets, experts say.

However, as of January 2019, Germany's Federal Transport Minister Andreas Scheuer (CSU) has yet to present a specific plan for transitioning away from internal combustion engines (ICEs). 

Launched by the federal government in September 2018, the Nationale Plattform 'Zukunft der Mobilität' (NPM; 'National Platform for the Future of Mobility') has formulated a number of proposals to speed up powertrain transition in mobility:

  • mandatory sales quotas for EVs and PHEVs: 25% in 2025 and 50% in 2030.
  • a general speed limit of 130 km/h on motorways
  • increased taxation of petrol and diesel
  • subsidies of €8000 for EV buyers (financed by the tax on fossil fuels)

Any abrupt move towards electrification is likely to be opposed by the influential lobby for the automotive industry, which continues to rely heavily on the sale of petrol and diesel vehicles. Meanwhile, diesel bans are being pursued at city level. 

Chapter 11: Mobility

Among larger fleet operators with at least 50 vehicles, 37.9% already offer alternative mobility concepts to their employees, while 35.9% expect them to be used more frequently in the future. The main reasons behind this are the fleet managers' need for more flexibility and environmental aspects.

The mostly used solutions are pool vehicles, trains and company bikes. In contrast, 93.3 percent of fleet managers are not interested in E-scooters, while 57.3% of company car drivers would like to drive them.

Source: Dataforce

Chapter 12: Key trends to watch