According to ABA-Invest in Austria the automotive sector in the country generates €43 billion in revenues annually and employs some 370,000 people in 700 companies. Annual production of around 247,500 vehicles in total each year breaks down into some 124,000 cars, 89,000 motorcycles, 19,500 trucks and 15,000 tractors. In addition, the country produces around 2.2 million engines and transmissions each year.

Magna Steyr is the largest car manufacturer in the country, building a range of models under contract, including the Mini Countryman and Paceman, Mercedes G-Wagen and Peugeot RCZ. The company has built up a reputation for producing four-wheel-drive systems too. MAN, part of the Volkswagen Group is the dominant manufacturer of commercial vehicles.

Data from the European Automobile Manufacturers Association (ACEA) show that for January to November 2015, total new car registrations in Austria reached 285,723, marginally less than for the same period in 2014 (285,927). LMC Automotive gives a full year total of 304,261, indicating year-on-year growth of 0.3% compared with 2014. Data for November shows registrations for the month 8.2% up on November 2014 at 23,381. LMC indicates that this growth trend continued into December with registrations up 6.6% to 18,538 compared with December 2014.

Slow economic growth: rising unemployment

Is that a good sign? In June 2015, Bloomberg reported that Austria had been given one of the lowest forecasts for economic growth in the Eurozone in 2015 at 0.8% GDP, compared with an average of 1.5%. Unemployment was also slowly rising, reaching 5.7% in April 2015. The motor industry may be one of the reasons for this performance. Bloomberg reported that Austria’s eastern neighbours such as the Czech Republic, Hungary, Poland and Slovakia are making a better job of investment in the automotive supplier sector, providing vehicle parts to Germany in particular. While Poland and the Czech Republic are improving their market share in trade with Germany, Austria has seen its share decline, falling below that of the Czech Republic and Poland in 2013.

According to the US Central Intelligence Agency (CIA) Germany is Austria’s largest export destination, responsible for 30.4% of Austrian exports, considerably larger than the share that goes to Italy, in 2nd place at 6.5%. Germany is also the largest exporter to Austria responsible for a 41.9% share, with Italy again second with 6.5%.

A forecast summary from the OECD in November 2015 suggests that a gradual recovery is underway and GDP could reach 1.7% by 2017. The OECD report suggests that, “The recovery will be driven mainly by historically low interest rates, lower oil prices, a pick-up in foreign demand and a weaker euro. Consumer confidence remains weak but the income tax reform, to enter into force in 2016, will boost private consumption.”

The forecast summary continues, “Close supervision of banks, in particular those active abroad, is essential to revive confidence. Reform backlogs in services hinder competition and reduce other sectors’ prospects of benefiting from cost-efficient intermediate inputs and the diffusion of new technologies. Growth could be further strengthened and made more inclusive by removing remaining impediments that restrict the scope of the elderly, in particular women, to participate in work.”

It’s a less than enthusiastic forecast, but even so, Austria has a strong economy, based mainly on the service sector, responsible for some 70.5% of GDP according to the US Central Intelligence Agency (CIA). Industry is reckoned to be responsible for 28.1%.

High renewable energy mix

Austria produces just 20.8% of its electricity from fossil fuels, according to the CIA, which states that 67.2% of the renewable energy is generated from hydroelectric plants and 12% from other renewable sources. This would seem to be a good basis for an EV market. That suggestion appears to be borne out by ACEA data on Alternative Fuel Vehicle (AFV) registrations in the EU, which between January and September 2015 rose by 29.2% compared with the same period in 2014 to 4,298, greater than the average growth across the EU of 19.8%.

Even so, this represents around 1.8% of total new car registrations in a full year, in line with AFV registrations across the major EU markets. Not surprisingly it was electrically based AFVs that fuelled the growth with EV registrations growing by 33.1% to 1,331 and hybrids by 42.3% to 2,424 in the same period.

Fleet Sector

Stephan Klier is the CEO of Alphabet Austria and gave us some insight into the business car market in the country. Overall, Klier reckons the business car sector accounts for around 400,000 vehicles, which is approximately 8.5% of the total car parc in the country. As the ACEA data shows, the overall number of annual car registrations is roughly static in Austria at the moment but Klier thinks there is a slight expansion in the number of fleet cars. “We are currently seeing a move away from the private to the commercial sector,” he observes.

Data from ACEA for 2014 shows that 59.12% of the cars in Austria are diesel powered with 38.42% powered by petrol engines and the remaining 2.46% powered by alternative fuels. It is no surprise that most business cars are also diesel powered, but tax incentives will encourage more E-mobility in 2016, reckons Klier, “E-mobility will grow further in 2016 due to no Benefit-in-Kind taxation, VAT deduction, no NoVA and no road tax.”

NoVA or Normverbrauchsabgabe is a tax on fuel consumption, imposed on all new cars registered in Austria. The tax is based on a bonus/malus system where cars with the highest CO2 emissions pay the highest rate of NoVA up to a maximum of 32%. The scheme was designed to encourage the use of cars with lower CO2 emissions.

As Klier points out, EVs do not attract a range of other taxes applied to business cars or their drivers. The only one of those he lists that is specific to business cars, as in many other countries, is the Benefit-in-Kind (BiK) taxation levied on company car drivers. Klier indicates that BiK is levied at a rate of 2% for cars with CO2 emissions of 130g/km or above and at 1.5% for those with CO2 emissions of less than 130g/km.

Klier sees a similar trend in Austria to other major European markets for SUVs and crossovers. These models are growing in popularity among business drivers.

Closed-ended leases and finance lease products are the available forms of finance for fleet leasing and Klier reckons that operational leasing accounts for around 80% of the market with the remaining 20% accounted for by finance leasing.