Win The German Company Car Segment And You Win Germany

Batteries

Published on August 14th, 2020 |
by Alex Voigt

August 14th, 2020 by  


On average, more than 60% of all new passenger cars sold in Germany are company cars. That’s an astoundingly high number already, but even more impressive is that every 12th employee in Germany drives one. In a company with 20,000 employees, it is on average 15.5%. In retail, approximately every 4th employee has a company car, and in the automotive industry it is every 11th.

This incredibly high number is not a coincidence, and I believe it’s the highest company car rate in the world.

If Tesla wants to win a decent market share in Germany, it needs to win in the company car segment for several reasons.

5% of all employees with a salary of €30,000–40,000 drive one and 63% of the lucky ones who made it to an annual income of €150,000 to €200,000 do. It is an incentive that lifts reputation and status, and not an unusual part of a first contract when you leave university. People who are successful in their job drive a company car. Hence, it is almost an advertisement for the brand of the vehicle.

If you walk on a normal street somewhere in Germany — in particular, in cities, and watch the new high-quality upper-class German cars driving around everywhere, you get the impression all Germans are rich, but that’s not true, because most of the cars belong to the companies, not to the drivers.

The majority of the money Germans earn goes along different paths to the government with the promise to pay you a decent pension, guarantee good health care, and protect you and other citizens with reliable unemployment insurance. How Germany weathered the coronavirus crisis so far, which has created positive attention all over the world, has to do with the health care system and how it’s funded.

All of that creates a certain social stability that citizens benefit from. In my opinion, this structure is one of the reasons why the German population is not as divided into two groups who don’t talk to each other anymore, as we see in many other countries — like, for instance, the USA and the UK. I have considered the high taxes I have paid throughout my life as a payment to guarantee stability, safety, and peace.

Among about 42 million employees in Germany, 12% of them have a company car and pay 1% of the new vehicle price in the form of their personal tax level every month. If it’s a fossil fuel car, it is 1%, and for a BEV only 0.25%. For a fossil fuel vehicle, that can easily be a few hundred euros every month in higher taxes. If you can cut that number down by 75%, it is substantial additional cash in your pocket.

Having heard all of these numbers, you may think the rate of BEV company cars in Germany ought to be very high, but that is not the case. Most companies have zero full electric vehicles on their lists to choose from. Even more interesting, most companies offer only vehicles from German manufacturers to their employees.

A lot of employees who would love to exchange their BMW, Mercedes, or Audi with a good fully electric car (BEV) can’t because not a single BEV is listed. Since you can use your company car for private purposes too, a lot drive with it for holidays and to spare a second vehicle. Gas is often subsidized by the employer, if not completely free, which is another motivation to use your carbon-producing car for long vacation trips.

If you qualify for a company car, you can choose mainly from Audi, BMW, Mercedes, or Volkswagen, and those companies do not have many BEVs to offer. Even if they do, fleet managers are resistant to add them because they believe costs are too high and service not available. That is, of course, wrong, as everybody who has compared total cost of ownership has found out, but for someone who worked their entire life only with fossil fuel vehicles, it is an often-seen prejudice. Also, German automotive companies do give high discounts for company cars, and that supports demand. (Tesla does not give any discount to anybody.)

The current protective structure is a win-win-win situation between the German government, the automotive industry, and employees.

The politicians are happy because the German auto industry gets a majority of its orders from company cars, and with that creates jobs for people who pay taxes they can spend. And if they create and guarantee many jobs, they get reelected again.

The automotive industry is happy because incentives support vehicle sales that they can rely on, and even more importantly, people get used to their brand very early after university. The likelihood that once they can afford their first private car they select a brand they drove as a company car is high.

The employee is happy because, for comparably small money, you get a vehicle that’s above your salary level at the time of your career. The increased status and prestige within your family, friends, and loved ones for having an expensive German brand is hard to beat. Emotions dictate our behavior much more than most believe.

These are three reasons why it’s a win-win-win for all parties, and it has been working for decades very well. Others benefit too, like the insurance industry, fleet managers, and service centers, to name just a few.

If you have wondered why Tesla sales numbers in Germany are still low, the company car structure is a major reason for it. Many Germans I know would be delighted to have a Model S or Model 3 as a company car, and that group will grow once the German Model Y is available. But when companies and fleet managers block Tesla from being listed, you should not be surprised about below-average Tesla sales in Germany.

The peaceful coexistence of politicians, the auto industry, and employees has been disturbed lately, though, by increasing calls from politicians and voters to offer attractive BEVs as company cars. The auto industry stayed silent and did not deliver, pushing hybrids instead, another form of fossil fuel vehicle that pollutes us all and supports the oil & gas industry.

There is hope, though, that the impressively low total cost of ownership will help to convince more companies to open up to BEVs. The e-tron is gaining more traction and the VW ID.3 is the first German BEV with the potential to be a mass-market vehicle, so the chances are increasing that BEVs will make it onto fleet manager lists.

Deutsche Telekom, a very large employer in Germany, has announced that it is including Tesla on its company car list, which implies that blue chip companies are the first to acknowledge that to attract new talent, they need to offer vehicles people want. The new German status symbol for many is not an Audi, BMW, or Mercedes any more, but a Tesla.

As a German, I am saddened to see that almost all large companies in Germany block one of the most attractive manufacturers in terms of total cost of ownership, safety, carbon emissions, and driving fun from their company car list.

It is a shame that they close their eyes and pay higher costs, but even worse, that they pollute the air to protect the German fossil fuel car industry for profit reasons. The best of today’s available options, a Tesla, is denied because it is not a German car, and even worse, it is a BEV.

With Gigafactory Berlin planned to start production in the first half of 2021, and thousands of Germans producing the Model Y in Brandenburg, no one can call it a “low-quality vehicle produced in the USA” any more. If the build quality is not on par with one from German manufacturers, now it’s up to the Germans to change that.

A new German word was invented lately that fits well to the situation we are in today. It describes feeling shame for something someone else is doing. That word is Fremdschämen. 
 


 


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About the Author

Alex Voigt has been a supporter of the mission to transform the world to sustainable carbon free energy for 40 years. As an engineer, he is fascinated with the ability of humankind to develop a better future via the use of technology. With 30 years of experience in the stock market, he is invested in Tesla [TSLA], as well as some other tech companies, for the long term.