Sweden is reckoned to be the third largest country in the European Union by area, yet has a population of some 9.6 million, giving it a comparatively low population density. The country boasts a high per capita income, reckoned to be between the seventh and tenth highest in the world, depending on the data source. Sweden was ranked second in the world on the Economist Intelligence Unit 2013 Democracy Index and the fourth most competitive country in the world by the World Economic Forum in 2012.

Iron ore is one of Sweden’s largest economic assets so it’s not surprising that motor vehicle manufacture is in the country’s top three industries, despite the bankruptcy of car maker Saab in 2011. Saab may yet rise again in the hands of Chinese consortium National Electric Vehicle Sweden (NEVS). Production is due to begin again in March 2014, producing an electric model based on the now defunct Saab 9-3. There is talk of a replacement model and drivetrain components sourced from Fiat for models powered by internal combustion engines.

Volvo Cars has been more successful. Having been grown into a thriving independent manufacturer, the Volvo Group sold the company to Ford in 2000. Ford then sold it to Geely of China 10 years later. Sweden’s other car manufacturer is high performance maker Koenigsegg.

Sweden’s truck and bus manufacturers Scania and Volvo are the other remaining vehicle manufacturers. Scania is now part of the Volkswagen Group and it is likely that it will progressively share more development and components with Volkswagen’s other truck and bus manufacturing subsidiary MAN of Germany.

That leaves Volvo Truck and Bus as the only remaining Swedish owned volume vehicle manufacturer, based near Gothenburg on the west coast of Sweden. Volvo bought into the US Truck market in the 1980s by acquiring the White and Autocar brands and forming a joint venture with GM. The company subsequently acquired GM’s truck division in 1997. Shortly afterward, Volvo acquired the Renault Group’s truck and bus making division in 2001, including Mack Trucks of the US. A few years later Volvo took control of UD Trucks of Japan, formerly Nissan’s commercial vehicle division, Nissan Diesel.

Sweden rode out the European financial crisis relatively well thanks to its strong economy. The country suffered its own problems during the early 1990s European recession when it was plunged into a deep financial and property crisis. In the succeeding years, the economy made a strong recovery and the 2008 financial crisis hardly touched Sweden, although the economy declined in 2009, but returned to growth in 2010 and 2011. Growth slowed again in 2012 with modest growth returning in 2013.

This has been reflected in the car market in Sweden. Total passenger car registrations dropped by -8.2% in 2012 to 279,899. For the first nine months of 2013, registrations have slipped further, with an average decrease for the year of -5.2%, greater than the EU 27 average of -3.9%. This leaves the total at 193,065, compared with 203,711 for the first nine months of 2013. October data showed further improvement with October registrations rising 5.42% to 25,322, compared with October 2012, according to the Swedish motor manufacturers association BIL Sweden. Registrations for the January to October period saw a further squeeze in the declining trend with a total of 218,397, -4.1% lower than the same period in 2012. If the average decline continues for the rest of the year, Swedish car registrations are likely to fall to around 268,400 units in 2013.

The Swedish National Institute of Economic Research publishes an Economic Tendency Survey and in October, the Economic Tendency Indicator rose 3.4 points from 98.2 in September to 101.6 in October. The Consumer Confidence Indicator climbed 4.1 points from 97.9 in September to 102 in October and inflation is expected to remain low in the coming 12 months. Overall, the outlook is good, so is that confidence reflected in the business car sector?

According to Alphabet, the factors affecting the overall Swedish car market include the relatively minor economic impact from the Euro crisis, financial assistance from distributors and importers and strong demand to replace the large number of vehicles that were ordered in late 2010. ‘There is a split picture because the consumer market is really suffering,’ says Per Löfgren, sales director at ALD Sweden. ‘I think this is depending on the level of uncertainty in the economy as a whole. People are not worried for their own jobs, but worried for the country as a whole.’ The effect has been to dampen demand in the retail sector, although the registration data suggests that maybe Swedes are beginning to worry less.

The Swedish business car market is estimated at between 220,000 and 300,000 cars in total. ‘This part of the market represents 50% to 60% of new sales,’ reckons Per Löfgren. ‘I wouldn’t say that it is not affected by the economy, because it is, of course, but not at all as much as the consumer market. I think it’s too early to say that everything’s doing OK, but we’ve seen the orders picking up for the last two months,’ he says.

It is not particularly surprising to find that Volvo does well in the Swedish business car market, remaining the first choice. Given the relative wealth of the economy, it is not surprising either to find that BMW and Audi are also favoured brands in the Swedish business car sector, as well as Volkswagen. Löfgren makes an interesting observation that could affect the re-marketing sector: ‘The Asian brands are very much the growing brands within the consumer market, so this has the effect that used car sales coming from the fleet market are not always what the private individual would like to buy. It’s a real mismatch sometimes. So the real competitor to a new Asian car is a two or three year-old BMW. And from our point of view it also works the other way. When we want to remarket our two, three, or four year-old company cars, the alternative is to go and buy a Kia for €16,000.’

Alphabet is clear about what types of vehicle are preferred for business use. Drivers prefer larger station wagons, with diesel engines and an automatic gearbox. The most popular tend to be the Volvo V60 and V70 as well as the Volkswagen Passat. Per Löfgren at ALD largely agrees: ‘We tend to have medium-sized estate models with low consumption, but the size of the cars in Sweden is still larger than in the rest of Europe.’ He notes the popularity of models such as the Volkswagen Passat, Audi A4, BMW 3 Series and Volvo V60. ‘If you look at the segment below, the only one really succeeding in the company car segment is the BMW 1 Series.’ The change has come in the larger car segment, reckons Löfgren. Models such as the Audi A6 and BMW 5 Series are not now as popular as they once were.

He also reckons there has been a downsizing trend in light commercial vehicles. ‘Utilities companies and maintenance fleets don’t carry as much as they did some years ago.’ He also believes that many commercial vehicle fleets are not covering the same distances as they used to. At the same time, light vans are more car-like to drive than ever before and this is giving drivers a better working environment. Alphabet sees a variety of light CVs in fleets, depending on need, but notes that the Volkswagen Caddy is the most common model.

Business car taxation is comparatively straightforward in Sweden. Alphabet says, ‘There’s a driver’s benefit added to the personal taxation for the driver in Sweden. The benefit is calculated from a formula involving an indexed base price, social taxes, the vehicle’s price, eventual deduction due to environmental impacts of the vehicle and the work related yearly distance driven by the driver.’

Per Löfgren says there are no environmental taxes for business car users, although all cars are subject to a carbon dioxide emissions-based vehicle tax. But he believes that a form of bonus-malus system is likely to be introduced. The only problem he can see is that the difference between the most and least polluting cars has narrowed in recent years, making it more difficult to introduce a banding system that graduates between the best and the worst.

Finance leasing remains popular in Sweden, but operational leasing is gaining in popularity. ‘The most common method in existing fleets is finance leasing,’ explains Löfgren at ALD. ‘But the fastest growing now is operational leasing. It accounts for over 20% of the market now and is growing more rapidly than finance leasing.’ He puts this down to a demand for more services from fleet customers, such as managing the fleet. He also sees a trend where traditional company fleet managers are not replaced when they retire.

Fleet finance could be provided from one of several sources including banks, leasing companies and captive providers, ‘Volkswagen and Volvo Finance are very strong in all segments, when it comes to car loans, finance leasing and operating leasing,’ says Per Löfgren. ‘Then the international leasing companies are very dominant when it comes to international companies because of their big fleets.’

So what of the future? Alphabet believes this will depend on the future taxation of company cars. The company says that the Swedish government is not known for long-term guidance in this area and if carbon dioxide taxation is tightened, it will result in a shift to smaller vehicles.

In terms of the vehicles themselves, Per Löfgren expects to see an increased take up of hybrid and plug-in hybrid models: ‘There will be a growing demand for electric vehicles, but the major threat to them is that plug-in hybrids will be more popular.’