Famed for its banking sector, manufacture of chocolate and watchmaking, Switzerland is a comparatively small European country. The US Central Intelligence Agency describes the country as, “Slightly less than twice the size of New Jersey.” Switzerland is located centrally in Western Europe and is completely landlocked, bordering Austria, France, Italy, Liechtenstein and Germany. The country has no less than four official languages – German, spoken by the majority of inhabitants, then French, Italian and Romansh. A CIA estimate put the population at around 8.1m for July 2015, slightly smaller than London.

Switzerland is not part of the European Union, although it was a founder member of the European Free Trade Area (EFTA). Car registrations reached 323,783 in 2015, according to Auto Suisse, an increase of 7.2% compared with 2014. That fits somewhere between Austria (308,555) and Sweden (345,108). Although there are no volume car manufacturers in the country, there are a number of small independent car producers such as Rinspeed and Sbarro, producing specialist vehicles. There is a thriving automotive component sector in Switzerland, while Iveco, the commercial vehicle arm of the Fiat Chrysler organisation, has an engine research establishment at Arbon, on the site of the former Swiss truck and bus manufacturer Saurer.

German makers dominate

With German the dominant language in Switzerland, it is not surprising that German car manufacturers perform well in the Swiss car market. Volkswagen was the best selling brand in 2014 and 2015 with 42,212 sales in 2015, an increase of 5.1% on 2014. BMW was the second best selling brand with 24,039 registrations, an increase of 14.2% over 2014. Mercedes-Benz was the third biggest selling brand with 22,884 sales, up 24.5% on 2014. Audi came a close fourth with 22,225 sales in 2015, up 6.1% on 2014.

Looking at individual models, there are few surprises, with the Volkswagen Golf the best seller with 15,288 registrations, followed by the Skoda Octavia with 12,228. The remaining slots in the top five best sellers are taken by the VW Polo, Audi A3 and SEAT Leon.

EV opportunity?

Geographically, Switzerland is a fairly mountainous country with the Alps to the south and the Jura to the north-west. The mountainous terrain not surprisingly brings lakes too. Lake Geneva which forms a border between Switzerland and France is 73km long and is one of the largest lakes in Europe. That terrain lends itself to hydro-electric power and just 2.5% of Switzerland’s electricity is generated using fossil fuels according to the CIA. Hydro-electric sources produce some 67.8% of the electricity, with 16.1% produced from nuclear power plants. Is that a stimulus for the EV sector in Switzerland?

Two new electric cars were launched at the Geneva Show in March, the eRod, produced by local Swiss EV manufacturer Kyburz Switzerland and the South Korean Yebbujana R2. According to e’mobile, established to promote alternative energy power for vehicles in Switzerland, there are now 1,000 charging points for EVs in Switzerland, including 70 DC fast charge stations. e’mobile reckons that most Cantons, the 26 Swiss administrative regions, offer tax reductions for electric vehicles.

Traditional ownership model

Despite, or perhaps because of the relative wealth of the Swiss economy, leasing is not a well-established model of vehicle operation in Switzerland. According to LeasePlan, “The Swiss fleet/business car sector is not as developed as in the neighbouring mature markets, e.g. Germany or France. SMEs especially have a tendency towards buying their fleet and maintaining the vehicles themselves, based on the Swiss culture of preferring to own things compared with renting/leasing them.“

This is similar to Alphabet’s experience. Alphabet reckons that about 50% of company cars are owned outright by the company. In line with the data on brands and models, Alphabet suggests that there are a lot of premium brands represented among fleet cars and also white label fleets. The market is described as, “User chooser driven”, by Alphabet and quality and service orientated. Alphabet agrees with LeasePlan regarding the tradition of car ownership in Switzerland.

LeasePlan says that around 63,000 new business cars were registered in 2015, which would account for around 19.5% of total car registrations. Overall, LeasePlan suggests there are around five million cars registered on Swiss roads. Alphabet estimates that new business car registrations accounted for many more than LeasePlan’s estimates, with around 120,000 new business cars being added to Swiss roads in 2015.

Market growth: good for fleets?

The continuing growth in the Swiss car market looks as though it has some advantages for fleets, but drawbacks too. Alphabet believes that it has increased pressure on margins for the fleet sector and also put pressure on residual values, but on the other hand has led to rising upfront discounts in premium segments.

Both LeasePlan and Alphabet report that station wagons and SUVs are popular choices for fleet cars. LeasePlan suggests that 4x4s with larger engines than in neighbouring countries are popular because of the terrain and winter weather. Alphabet suggests that 4×4 models are more likely to be chosen by those at management level.

The total light CV sector in Switzerland grew 7.7% in 2015 to 30,833. Market leader was VW, with a total of 5,526 registrations according to Auto Suisse. The VW Transporter put in a strong performance, supported by the Crafter. Ford took second place with 4,180 registrations and the Ford Transit Custom performing strongly. Renault was the third best seller with strong sales of both Trafic and Master models, and registrations totalling 3,716.

The highest concentration of registrations was in the 2.6 – 3.45 tonne gross vehicle weight (GVW) sector, although manufacturers such as Mercedes-Benz and Iveco with traditional strengths in heavy vans sold most vehicles in the 3.45 – 3.50t GVW sector. In the 2.6 – 3.45t sector registrations rose 14.5% to 13,667, while in the 3.45 – 3.50t GVW sector, registrations grew by 3.4% to 9,505 in 2015.

Since most light CVs are operated by fleets, particularly in the weight ranges favoured by Swiss buyers, it seems likely that the data for light CV registrations gives a good picture of the Swiss light CV fleet business. LeasePlan suggests that demand for light CVs is growing in fleet business and is becoming more important.

Tax advantage?

Switzerland has a reputation for its comparatively low personal tax rates and that would appear to be the case where Benefit-In-Kind taxation is concerned. According to LeasePlan, “0.8% of the investment value is added to your monthly salary in terms of a non-cash benefit. The investment value is not being received in cash, but deducted on the annual tax declaration.” Accountants PwC clarify this further, “The free use of a company car for private purposes is considered as a taxable benefit. The value of this benefit is subject to cantonal variation but is, in many cantons, fixed at a monthly amount of 0.8% of the purchase price of the car (minimum CHF 150 per month).”

As discussed previously, there is a tradition of ownership in Switzerland, which has limited the development of vehicle leasing, compared with neighbouring countries such as Germany or France. Not surprisingly, this means that there are three popular acquisition methods for company cars: outright purchase, finance leasing and operational leasing. As far as leasing is concerned, LeasePlan suggests that 40% of the market for company cars is in finance leasing, compared with 60% for operational leasing.

Alphabet’s experience is different from this and the company suggests that operational leasing has a 30% market share.

Potential for leasing growth

Data from the Swiss Leasing Association’s 2014 annual report shows that in 2014 the total car leasing market was worth €10.6m. Private leasing accounted for 69.9% of this total, with commercial car leasing responsible for 30.1%, of which fleets accounted for 10%.

In terms of new contracts, the total number of new contracts written for car leasing in 2014 was 202,289. Again the majority, 144,736 (71.5%) were for private leasing, while business leases accounted for 57,553 (28.5%) of which fleets accounted for 18,959 (9.4%).

Data for the total number of leases at the end of 2014 shows there were 573,828 leases in existence for cars overall. Again the largest proportion – 435,830 (76.0%) were for private leases with 137,998 (24.0%) for business car leasing, with fleets taking 52,757 (9.2%) of these.

Add in the leasing business for light CVs and that was worth a further €983,660 in 2014. During the year a further 16,757 new contracts were written for light CV leasing, bringing the total number to 53,347.

The Swiss Leasing Association also produced data on the fleet sector, worth €1.786m at the end of 2014. Full service leasing accounted for 64.7% of the total and finance leasing for 35.3%. 23,477 new leasing contracts were written for fleets in 2014, with full service leasing accounting for 56.7% of the total and finance leasing for 43.3%. At the end of 2014, there were 69,995 fleet leases with full service leasing accounting for 46,533 (66.5%) and finance leasing for 23,462 (33.5%).