German automakers benefit from company car tax breaks for third of domestic sales

German automakers benefit from company car tax breaks for third of domestic sales

Clean Energy Wire — 2022-09-05

Automotive Industry

The German car industry heavily benefits from the country’s company car tax breaks, media alliance Redaktionsnetzwerk Deutschland (RND) reports. More than a third of all newly registered cars in the country, about 989,000 vehicles in 2021, are company cars, according to figures published by carmaker association VDA. “Due to the strong car industry here, they have a greater importance than in other countries,” car industry researcher Ferdinand Dudenhöffer told RND. Especially premium carmakers in Germany would calculate with many purchases in their top segments coming from companies, where buyers are likely to pay more for a car than they would do privately. According to the VDA, the share of German producers in company cars is 82 percent, but it drops to only 68 percent for all cars on the road. Company cars thus disproportionately benefit the national economy, Dudenhöffer said. However, the policy also appears to contribute to the prevalence of heavy and more inefficient cars, one reason why environmental groups contest the tax privilege of company-owned cars, which according to the Federal Environment Agency (UBA) amounts to subsidies of about €3bn per year.

Think tank Agora Verkehrswende found that tax cuts for company cars are undermining the country’s efforts to get a grip on its stubbornly high emission in the transport sector. The controversial tax privilege should be made contingent on the vehicles' climate impact in a more general overhaul of Germany's mobility taxes, the environment agency UBA said.