The Belgian car market is in a curious position at the moment. The European financial crisis may be starting to ease, although across the border France is still struggling. In Germany, the market is still declining slightly, but may be showing signs of levelling out. Flemish neighbour, the Netherlands, having appeared to be weathering the financial storms well, has been sunk into financial turmoil as the country’s overheated property market has collapsed, with a consequential sharp fall in new car business. Amidst all this, Belgium appears to be making some financial headway. The car market reached 572,211 new sales in 2011 but fell back 14.9% to 486,737 in 2012, according to data from the European Automobile Manufacturers Association (ACEA). For the first six months of 2013, registrations have risen slightly to 289,873, up +1.7% on the first six months of 2012. Besides cars, light CV sales accounted for around 400,000 sales in 2012 and heavy commercial vehicles around 55,000 units.

The explanation for the 2012 reduction in the new car market has been partly the effects of the recession and partly the effect of a change in Benefit-in-Kind taxation policy for business car users from the new Belgian Government. A benefit-in-kind tax is applied to cars provided by employers, based on factors including CO2 emissions and the price of the car, with options. That situation is not unusual in the region, but this tax scheme was introduced in 2012, replacing a previous scheme where the tax liability was calculated based on private mileage, CO2 emissions and fuel type. As a result the BIK tax liability for many company car users was increased notably, bringing a reduction in new car sales. For this year, the market has increased by 0.43% according to ALD Automotive General Manager for Belgium Miel Horsten, and forecasters are suggesting no significant increase for the remainder of 2013.

Belgium itself is the home of the European Commission, based in the Belgian capital Brussels. The country also hosts the Council of the European Union and the North Atlantic Treaty Organisation (NATO). Belgium has no single language, but is divided roughly north/south between the mainly Dutch-speaking north (approximately 60% of the population) and French-speaking south (approximately 40% of the population), with a small German-speaking region when Belgium annexed a small part of Germany in the 1920s.

Brussels is located in a small French-speaking region in the North in the heart of the Dutch-speaking region. The presence of the major international organisations in Belgium, combined with the country’s fairly central location in Northern Europe is good for business in the country and multi-national companies are well represented in Belgium.

The country used to have a thriving motor industry. Ford had manufacturing plants at Genk along with Audi, General Motors, Volvo Cars, Volvo Trucks and Daf Trucks. Coach producers Van Hool and VDL Group were also represented. Now Ford is closing its Genk plant and GM withdrew a few years ago. The closure of the Ford Genk plant could reduce jobs by around 10,000 in direct and indirect employment.

As far as the business vehicle sector is concerned, finance and leasing companies are well represented, including LeasePlan, ALD Automotive, ING Car Lease, Arval and Alphabet. The business car market operates in a similar way to the developed business car markets of Northern Europe. Business cars account for between 42% and 50% of the total new car market. Premium brands are favoured by business car users, with the German premium brands being well represented.

The BMW 3 Series and 1 Series are popular, along with Audi and Mercedes-Benz. Volvo is also popular as a premium brand alternative. Considering the car market as a whole, Volkswagen is the most popular brand, followed by Opel and Peugeot, according to LeasePlan. JATO Dynamics also puts VW in top place, both for total market sales and business sales. JATO places Renault in second place for both retail and business sales, Peugeot in third place, Citroen in fourth place and Opel in fifth place for total sales. For business sales JATO ranks BMW first followed by VW, Audi, Mercedes-Benz and Renault joint third and Opel in fifth place.

As we have said, growth in the new car sector has been small this year, which has had a parallel impact in the business car sector. ‘Overall growth for the sector is not that big,’ says Miel Horsten of ALD. ‘It is partly influenced by a couple of very large salary sacrifice programmes.

‘If you look at it in 2012, the new way of calculating the Benefit-in -Kind-tax of a company car created uproar in the market. Everybody was very upset and all lease companies and car manufacturers were saying that this is the end of the company car in Belgium. The overall impact was that income taxes for people with a company car went up. Overall, it was not very well balanced. I think pure electric cars were still OK, but hybrid vehicles such as the Opel Ampera, which still have tailpipe CO2 emissions, but a high investment value were completely penalised. So it was a bit of a missed opportunity. In Belgium we call it the ‘Jealousy Tax’. Who cares if someone drives in a €30,000 car or a €40,000 car as long as it is clean?

‘At the same time, the tax goes down with the age of the car, which you might say is a good thing to do. But the problem is that this actually slows down new vehicle purchases because people just say. ‘I’m going to keep my car an extra year’.

‘The funny thing about that is that like in every country, we think that we’re the worst country when it comes to income tax, which in Belgium is probably the truth. But if you look at it, a company car is still the most tax efficient way of compensating people.’

Even so, the effect on business cars users has been predictable. According to JATO Dynamics, users have been opting for smaller cars with smaller engines. LeasePlan also reports that buyers are opting for more petrol cars under the new system, perhaps because they tend to have a lower selling price than diesel cars. LeasePlan estimates that the percentage of new petrol cars has increased slightly from 23.5% in 2011 to 29.9% in 2012. The company also suggests that the new fiscal rules have encouraged a switch from company to private ownership for small to medium sized companies (SMEs).

Financing methods vary, generally according to the size of the company, reckons LeasePlan. ‘There is a difference between small and large companies: while large companies prefer operational leasing (more than 50%), 43% of the SMEs choose private funding above financial lease (20%) or operational lease (9%). Financial leasing accounts for approx. 20% in both segments.’

Miel Horsten at ALD sees growth in salary sacrifice schemes. Why? ‘Typically, we have automatic indexation of our salaries in Belgium,’ he says. ‘Which means that if the consumer index goes over a certain level, all salaries are adjusted, which for remaining a competitive economy is a disaster, compared with countries like Germany. Because of the indexation on the employers’ side and the BiK taxation on the employees’ side, people try to get a company car because it is so tax efficient, so the salary sacrifice programmes we’ve had are mainly responsible for the growth in the company car sector.’

THE TRENDS

So what trends appear to be emerging for the Belgian business car sector? LeasePlan believes that the growth of the total market is aligned with economic growth. The company has also seen that the lifetime and budget duration of a vehicle are getting longer. LeasePlan says that today, the mobility alternatives in Belgium are limited: 

• Only 10% of employees use public transport for commuter traffic. 

• Traffic congestion in the major cities is becoming dense. 

• Governmental actions to improve mobility include enforcing large companies to implement a mobility plan in the capital cities. 

As a result of these factors, LeasePlan believes that leasing companies will focus more on fleet and mobility management rather than operational leasing, together with an increased flexibility and service demand.

‘I do think there is still room for growth,’ says Miel Horsten at ALD. ‘Especially in the SME sector. We’ve got a lot of small family-owned businesses. Typically still a lot use outright purchase; so there is still some room for growth there. I expect that we have a few years of 2-3% market growth ahead of us. And I think besides that there’s going to be a push towards add-on services.

‘There’s going to be a lot of to-do about mobility,’ says Mr Horsten. ‘People just don’t want to sit in a car for three hours a day. The traffic density of our roads is so high and people just don’t want to lose their time in traffic any more. There’s a large quantity of small start-ups coming up with things like car sharing.’