It may be the fourth largest economy in the world, but Germany has been through a difficult time recently. Even so, this now appears to be a thing of the past. Peter Kainradl, managing director of White Clarke Group in Austria and Germany reports that; ‘The economy is back on a growth track, business confidence is at its highest since 2011; the DAX index of the 30 largest German companies closed above the enormously important 10,000 level for the first time in June and the MDAX index of the next 50 companies has been performing even better.’

Leasing: cars up, CVs down

There are signs that the leasing sector showed a return to growth in Q1 2014 after a static period from 2011. In White Clarke’s recent Asset and Auto Finance Country Survey of Germany, data from the German national leasing association BDL, shows that at the end of 2013, cars and commercial vehicles accounted for 69% of leasing assets in Germany. According to the Association of Automobile Banks and Leasing Companies in Germany (AKA), new individual lease and financial contracts on cars grew 1% in 2013 to 557,950, while those on commercial vehicles fell -2% in the same period to 672,954. The total value of the new car leasing business was €10.85 billion and €19.25bn for commercial vehicles. According to the White Clarke survey, 78% of dealer customers in Germany use leasing or other finance deals instead of outright purchase, a proportion that has increased from 60% in 2009.

Car registrations rise in 2014

According to data from the European Automobile Manufacturers Association (ACEA), registrations in Germany fell by -4.2% to 2,952,431 in 2013. Perhaps reflecting the upsurge in the economy, growth has returned in 2014 and ACEA data shows that for the first six months of the year, car registrations grew by 2.4% to 1,538,268, which suggests a full year market exceeding three million registrations this year. Volkswagen remains the best selling brand in Germany, while the Volkswagen Group is also the best selling in Europe.

It’s perhaps not surprising that the success of Volkswagen and its related brands is reflected in the business car sector. ‘The Volkswagen brand has the biggest market share, both in the market overall and in the commercial and fleet sector,’ says the CEO of Alphabet Germany, Marco Lessacher.

German brands dominate

‘In the company car market 80% of the German fleet total distributes among the German brands Audi, BMW, Ford, Mercedes, Opel and Volkswagen. As Ford and Opel have major sites in Germany they are perceived as German brands as well,’ reports LeasePlan. ‘In Germany the German automotive manufacturers absolutely dominate the market. Import brands hardly play a role.’

Karsten Rösel, general manager at ALD Germany adds, ‘I would say there is a dominance of the Volkswagen Group, including Audi, Skoda, SEAT, Volkswagen.’

He has a different view from LeasePlan regarding imported models: ‘Overall, I would say the importers are doing a pretty good job here. We have two brands that have recovered very strongly, Ford and to some extent Opel. Hyundai is growing and also Toyota. What is also interesting is that other brands are now seriously trying to enter the German market. Mainly Infiniti, also Hyundai with the Genesis, then Maserati with the Ghibli. For a long time we have not seen movement in this segment and now there is really a variety of cars. Ford is coming in with this full-size SUV. The importers are coming back to the high-end segment. The times for 5 Series, A6 and E-Class are getting a bit tougher.’

Leasing growth expected

There seems general agreement on the size of the business car market.

‘Passenger car registrations in the commercial and fleet segments amount to about 680,000 units per year. In 2013, passenger car registrations in the sector were 653,000 vehicles,’ says Marco Lessacher of Alphabet.

Karsten Rösel reckons that about 25% of the annual new passenger car sales are what he would describe as "true fleet".

‘The German market as such is driven by lots of what we call ‘artificial’ registrations,’ he says. ‘Of course it’s real registrations but big volumes of registrations are done through dealers, car manufacturers, car rental companies. That’s a big volume of the market that to some extent is cannibalising the true fleet registrations because you have the first registration on a dealer or a manufacturer. Then the used car, a nearly new car is sold. It’s not counted as a registration, it’s then counted as a used car.’ These cars may be just one day old before they are sold again.

‘This is also to some extent influencing new car registrations in the fleet business, especially the smaller commercials. They like to go for bargains at the dealers and try to get one of these heavily discounted almost new cars,’ he reckons. He estimates the true fleet new registrations at around 650,000 to 700,000 a year, of which German manufacturers take around 500,000.

C&D segment popular, SUVs rising

Not surprisingly, diesel engines are popular among fleet drivers of both cars and light commercial vehicles. Among passenger cars, saloon cars and station wagons are especially popular, says LeasePlan. The company reckons that together these body styles contribute to a share of over 90% of company cars.

‘When it comes to body style, estate cars command the biggest share for business use,’ says Marco Lessacher of Alphabet. ‘The best thing is a car with huge horsepower and very low consumption!’ says Karsten Rösel of ALD. Most customers choose either C or D-segment models, typically Volkswagen Golf, Opel Astra, Ford Focus or Ford Mondeo, BMW 3 Series, Audi A4, Opel Insignia, Mercedes-Benz C-Class. He also notes popularity for mid-sized SUVs among drivers who don’t cover much distance on the Autobahn network. Popular amongst these, says Karsten, is the Hyundai Santa Fe; ‘A car that no-one had counted on but is selling very well.’ The Ford Ranger pickup is also a popular choice, he reckons.

German brands strong in light CV

Predictably, the light CV segment is smaller. ‘Some 240,000 light commercial vehicles are registered in the commercial and fleet segments per year. Out of those, approximately 180,000 are registered as ‘commercial vehicles’ with the remainder being regarded as ‘passenger cars.’

‘Volkswagen is the strongest brand with Mercedes being in second place. The two manufacturers make up half of the registrations,’ says Marco Lessacher of Alphabet. LeasePlan reckons 1.7m light CVs were registered in 2013, with Ford, Citroën, Mercedes and Volkswagen among the popular brands.

High leasing levels in large fleets

As we’ve indicated, leasing is a popular option in Germany. ‘About 60% of all business vehicles are financed by leasing. In the big fleet segment the share is significantly higher. Generally it can be said that, the bigger a company is, the more leasing as a financing method is preferred. The full-service-leasing share for big fleets is about 75%,’ reckons LeasePlan. ‘Three out of four passenger cars sold in the commercial and fleet segments are financed by operational lease contract.’

Karsten Rösel reckons about 60% will be leased in 2014; ‘Because the interest rate is so low.’ He also sees a trend to full service leasing among smaller companies.

For the future, LeasePlan expects steady annual growth. ‘Analysing the market development continuously we expect an annual growth rate of 1.5% of the mature German fleet market. We see growth potential especially in the small fleets segment, in the segment of civil service fleets, that has special needs, as well as in the non leasing friendly segment.’