German fleet management is becoming an increasingly complex and challenging sector for both operators, customers and associated suppliers, who have to contend with legal, political and environmental uncertainty.  Here, we look at the opportunities and challenges facing the German market, from EV adoption and the complexities of tax issues and emission regulations plus the confounding impact of WLTP.

 

Paying the price of pollution

In a country with a rich automotive heritage centered around prestige cars with high-performance combustion engines, EV adoption in Germany is always going to be a challenge. However, with only around 420,000 electric and hybrid vehicles in a national fleet of 47 million in 2019, the overriding objective of the German government’s climate cabinet has to focus on stimulating demand for low emission cars.

Taxation is one of the principal forms of achieving this goal. Company cars with combustion engines, which are also used privately, are taxed at 1% of the gross list price, whereas electric vehicles and plug-in hybrids (which do not exceed 50g CO₂ emissions per kilometre or an electric range of at least 40 km) can be taxed as little as 0.25% and 0.5% respectively. Certainly, a welcome monetary incentive to drive greener. 

Ms. Merkel, who early in her tenure was known as the “climate chancellor,” has introduced an ambitious package to reduce the country’s climate footprint. Under the terms of the new package, Germany will work to reduce carbon emissions by 55% of 1990 levels by 2030.

This means that transportation companies will be required to buy certificates for 10 euros per ton of carbon dioxide emitted and the price will increase to 35 euros per ton by 2025. Plus, the package also includes a range of subsidies and incentives to switch to climate and environmentally friendly vehicles.  

Electric and plug-in-hybrid private, commercial and company car scheme vehicles which are included on the BAFA list receive an environmental bonus which is granted 50/50 by the manufacturers and a federal contribution.

The Climate Protection Program 2030, which aims to get 10 million electric cars on Germany’s roads, will see this so-called environment bonus jump by 50% to as much as 6,000 euros per electric vehicle. The auto industry will continue to cover half the cost as part of the ongoing commitment to cleaner driving.

Subsequently, fleet managers are undoubtedly being encouraged towards EV dominated fleet contracts. In 2019, although many more electric cars were newly registered compared to 2018, the market share is only 1.8% , compared to Norway, which has a market share of 55.9%.

 

The impact of WLTP

The Worldwide Harmonised Light Vehicle Test Procedure (WLTP) has certainly shaken up the European automotive industry. German fleet managers are being forced to consider the implications of WLTP standards when negotiating lease contract deals and making business critical decisions on make and model purchasing and running costs. 

Although diesel and petrol vehicles still dominate private purchases, many fleet customers have taken the introduction of the WLTP as an opportunity to update their car policies – but with varying shades of green. Some simply adjusted their budget or emission values (to ensure that the same vehicles could still be ordered) while others have seen it as an opportunity to introduce a low-emission fleet and flout their eco-credentials.

 

Leasing trends

The German vehicle leasing sector is experiencing positive growth with company car registrations expected to increase 1.9% over the next five years, partly attributed to employees preferring the salary sacrifice model to fund their cars. Plus, given the uncertainty and high residual risks associated with car ownership, leasing is proving to be an increasingly attractive car finance option.

Government initiatives driving down the residual value of air polluting, fuel-guzzling cars, combined with the promotion of EVs through subsidies and tax incentives, is making fleet managers increasingly interested in new mobility contracts – most citing cost and environmental concerns as their motivation for considering a green fleet model.

However, EVs and hybrids are only making a significant impact for car-pooling in urban areas where charging stations are easily accessible. It is concerning that latest statistics reveal increasing registrations of diesel cars in the fleet sector particularly where long distance driving makes diesel the most cost-effective fuel choice.  But at what price?

Reticence to opt for greener mobility solutions is not sustainable long-term for the environment or the economy. Although EV adoption in Germany has been much slower than some other European countries, several German cities, Berlin included have already banned diesel cars.

Increasing restrictions, introducing environmental zones and prohibiting high-polluting vehicles from entering a city is a step in the right direction. But pollution-laden travel is still an issue across Germany. Ethical stance, corporate responsibility and legislation needs to change dramatically if Germany is to see the decline of diesel gather momentum in line with the rest of Europe.

 

Fleet technology trends

The German car industry is significantly influenced by digitalisation. Future generations of drivers will embrace digital technology and data insights that will support sophisticated in-car services making driving easier, more comfortable, safer – and greener.

German car makers must become more tech and innovation-led than ever before by shaping the sector with environmentally friendly driving systems and in-car gadgets to meet the discerning demands of customers who will soon expect luxurious, no compromise green motoring. Seat massagers, voice-activated safety features and mood enhancing lighting will become the norm, not an added extra.

 

Support for EV adoption

Alternative drive systems, such as hybrids and electric vehicles, are slowly taking off in Germany, even though the higher development and battery costs are driving up the price of an electric car.

VW’s ID.3, for example, starts at just under 30,000 euros, while the least-expensive version of the new combustion-powered Golf is less than 20,000 euros. That’s why government and manufacturer subsidies are pivotal in green car adoption to make it a more attractive and affordable option to fleet operators.  

German policymakers have recognised that they must also play catch up in the development of a viable charging infrastructure.  The government’s push to promote electric cars includes boosting the number of public charging stations to 50,000 within two years. Furthermore, manufacturers will help fund 15,000 stations by 2022. BMW has said it will install 4,100 charging points at its German locations by 2021, with about half being open to the public.

 

Mobility management needs to gather momentum

Mobility has become the latest buzzword in fleet management across Europe.

Countries have reaped the rewards of implementing car sharing, pooling, fleet electrification and diversified modes of travel including trains and bikes into their mobility strategy.

However, Germany is lagging behind in many of these areas, although corporate car sharing is gaining traction within large organisations. The German Bundesrat only approved e-scooters for road use in May 2019 and the government does not actively promote price-advantaged rail travel making it a viable corporate option.  Private car-sharing is also not seen as an attractive alternative to having a company car which is still perceived as a highly desirable employee benefit in Germany.

 

As the travel needs of employees evolve and the pressure to conform to environmental and social obligations grows, German fleet operators will be forced to rethink their stance on mobility by offering alternative ways to move resources more cost effectively – and more eco-efficiently.

 

Three biggest challenges facing fleet operators

Undoubtedly one of the biggest challenges facing fleet managers in Germany is the fast-paced, dynamic and highly competitive automotive sector in which they operate. Successful managers must take a proactive stance on advising customers on new legislation, sourcing greener initiatives and smarter ways to operate – from reduced vehicle downtime and increased journey optimisation to eliminating fuel waste and air pollution. 

Another challenge is finding qualified and professional staff who have the ability to adapt to the multifaceted and ever evolving services and qualities required by the profession. Traditional fleet management is evolving fast – it is now so much more than getting goods and resources from A to B efficiently.

It has transformed into a wider asset and solution management role – from people and environmental management, operational and legislative knowledge to budget control and technical automotive expertise. 

Lastly, digitalisation provides insightful data that could improve and evolve services and safety but the restrictions of data protection often hinder the ability to use findings to deliver best practice.

 

Challenging times ahead in driver safety

Fleet managers play a key role in driver safety and their ability to provide ongoing training and utilise new generation car technology is pivotal in delivering this duty of care.

However, fleet managers are often so overworked with everyday responsibilities that prudent risk assessments get overlooked. Identifying and analysing trends in the main causes of accidents within their fleet so that preventative measures can be introduced should be a business priority. In reality, it is likely that this time is spent evaluating budgets and ROI. 

The associated risks of driver distraction caused by in-car technological features or driver fatigue and stress should also be addressed in formal training programmes. By law, German companies must ensure that their employees regularly take part in driver training, show their driving license at least twice a year and undergo vehicle inspections, such as accident prevention regulations (UVV). This should all be formalised in a corporate mobility strategy – but such formalities can be costly and time consuming.

 

The future of fleets

The German fleet market is flourishing. Commercial fleet registrations grew by 8.1% in 2019 which establishes fleet managers in a more strategic and influential role than ever before.

Looking to the future, fleet managers must make business-enhancing decisions within the confines of eco-mobility and evolving taxation and EV subsidy regulations.

In a country that has brought us the prestigious Porsche and the stunning SLK, the challenge is finding a compromise between the kudos of owning a desirable company car with the need to protect the planet.