Germany

Last modification: 31 Jul 18
Introduction: 

The company car is still an important topic for the users. The private use of a company car by an employee is considered to be benefit in kind for German income tax purposes. The value can be calculated based on a driver's logbook (with high requirements for acceptance) of business and private journeys. Alternatively, the monthly benefit in kind can be calculated based on the simplified method as 1% of the list price of the car. In this case, the amount based on the "1% Regulation" is considered to be the value of the private use of the company car per month and subject to wage tax and social security contributions. 
Other topics are the payroll tax free recharging of electric car battery at workplace and the expected increase of the CO2 emission based vehicle tax as a result of the implementation of the rules for a worldwide harmonized light duty test procedure (WLTP).

Chapter 1: Economic and business environment

Demographics

80,594,017 (July 2018)

Capital

Berlin

Major cities

Hambourg, Hannover, Berlin, Postdam, Kiel, Magdeburg, Dresden, Munich, Stuttgart, Saarbrücken, Mainz, Frankfurt, Düsseldorf

Languages

German

GDP

$44,524 per capita (Dec. 2017)

Unemployment rate

3.6% (Dec. 2017)

Main industries

Germany has the largest national economy in Europe. 99% of all German companies belong to the German Mittelstand (small and medium-sized companies, mostly family-owned).

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

Currency

Euro

Interest rate

2.05%

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.

Inflation

1.7% (2017)

Chapter 2 : Automotive market, segments & sales

Total Car park

46.5 million passenger cars (2017)

Model preference top 5 (total market)
  1. Volkswagen Golf
  2. Volkswagen Passat
  3. Volkswagen Tiguan
  4. Mercedes C-Class
  5. Volkswagen Polo
Used car market/renewal cycle

The average age of the car park is 9.4 years.

Chapter 3: Company car market

Evolution fleet sales (last 5 years)

2013   -6.2%
2014   +9.5%
2015   +9.9%
2016   +5.3%
2017   +2.1%

Top 5 fleet brands (fleet market)
  1. Volkswagen
  2. Audi
  3. Mercedes
  4. BMW
  5. Ford
Fleet Model preference top 5 (fleet market)
  1. Volkswagen Golf
  2. Volkswagen Passat
  3. Audi A4
  4. Skoda Octavia
  5. Mercedes C-Class

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 local municipality. The sum should not exceed €100.

Motor vehicle tax

Foreign registered cars are subject to German motor tax vehicle 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.

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 connective 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 relation between the company size and operating leasing as main financing method. If 34% of small German companies (up to 100 employees) use Operating Leasing, there are almost 58% of large companies (1,000 employees or more) to use it.

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. 

Chapter 7: Fuel

Fuel type segmentation

Total market in 2017:

  • Petrol: 57.9%
  • Diesel: 38.8%
  • Electric: 0.8%
  • Hybrid: 2.3%
  • Other alternative: 0.2%

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 driving the demand for corporate car-sharing and tailor-made solutions for vehicle fleets. The economic environment currently 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. Many fleet operators not only rely on external services for economic reasons, but also to adequately cover all legal requirements. 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 the future, the connective 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. 

The TCO equation

Depreciation and fuel stay the biggest slices in the average TCO pie in Germany. 

(Source CARANO)

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

If the equation that my mobility means my car no longer applies, we have to think differently about insurance coverage. The customer will then want to have the same coverage, no matter which means of transport he is traveling - car sharing vehicles of various service providers, own car or bicycle. The development of autonomous cars will change car insurance as well.

However, car insurance has grown by more than 30% to €26.9 billion in the last seven years. Adjusted for inflation, it was still a good 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 is coming with the new A-Class on the market. After the E-Class, it becomes the manufacturer's second model with full default built-in connectivity, so data collection and transmission. Mercedes has developed the Mercedes Me platform for its customers. Apple announced earlier this week to build its own hospitals, Google also wants to penetrate with his daughter Verily in the health market. What does this have to do with insurance? Incredibly much. 

The insurance of vehicle fleets can become the first segment in the car insurance which is completely digitally handled. 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. For 2018, Marc Odinius, expects a new record level of 870,000 new registrations after reaching a high in 2017. Unlike the usual industry definition of ten vehicles, Dataforce has already a fleet of commercial vehicles.  
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

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Chapter 11: Mobility

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Chapter 12: Key trends to watch