Germans have long been fascinated by automobiles – cars in general, and company cars in particular. But is that still the case today? hkp/// group experts Carsten Schlichting and David Voggeser on changes in company car regulations.
Germans have long been fascinated by automobiles – cars in general, and company cars in particular. But is that really still the case today? hkp.com spoke to the hkp/// group experts Dr. Björn Hinderlich and David Voggeser about current changes in company car regulations at German firms.
If there's one fringe benefit that almost every employee in Germany hankers after above all else, it's the company car. What lies behind the lasting appeal of the company car in Germany?
David Voggeser: In fact, there are many different reasons. They range from financial aspects (such as better conditions and tax benefits) to functional support (in certain jobs) and social aspects. Having a company car is still a symbol of having reached a certain level in the hierarchy, a sign of success.
You differentiate between functional vehicles and status symbols.
David Voggeser: Yes. Service engineers and sales reps need vehicles that are suitable in terms of their products and areas so they can serve their customers effectively. A station wagon or a van will likely be more appropriate than a coupé.
Carsten Schlichting: But even vehicles that have value as status symbols – the type of car usually given to employees from the fifth level below Board level upwards in small firms, and from the fourth level upwards in medium-sized and large firms – have a functional component too. Companies want their managers to be mobile, and many management jobs would be difficult or even impossible without your own vehicle. For those at the very top, of course, the car comes with a driver…
…which is also for safety reasons, right?
Carsten Schlichting: For road safety and, in the case of some top executives, the drivers provide personal security too.
So, no change here. It's business as usual?
Carsten Schlichting: No, no! Company car regulations are changing very quickly at the moment. Businesses are putting more and more stress on efficiency when it comes to how they manage their company car programs. At the same time, areas such as CO2 emissions and alternative mobility concepts are playing an increasingly important role.
Let's take a closer look at that. How widespread, and how specific, are the rules on CO2 emissions in company car regulations?
David Voggeser: Roughly half of DAX and MDAX firms include CO2 limits in their company car regulations. Such limits aim to encourage environmentally friendly vehicle use, which in turn often forms part of the company's corporate social responsibility (CSR) strategy. Firms encourage their staff members to choose more efficient vehicles that have lower CO2 emissions, less fuel consumption and are cheaper to buy and maintain – by offering them subsidies or other benefits, such as an electric bicycle in addition.
Carsten Schlichting: The emission limits depend on your level in the hierarchy, just like they depend on vehicle size and brand. For the first level below the Board, the limit is usually around 170 g/km, for the second level around 150 g/km. Those rates almost certainly represent the beginning of a process of continual reduction that we will see over time.
What about electric vehicles? Does e-mobility play any role in company car regulations?
David Voggeser: Electric mobility already impacts on the world of company cars. Its influence will grow stronger in the future as the purchase price of electric vehicles comes down and their range and safety levels go up.
The biggest stumbling blocks are power storage and swapping batteries…
Carsten Schlichting: That's correct. But if fleet operators can form major partnerships with power storage and battery companies so employees can charge or exchange their car batteries at work, like their laptop batteries, we could soon be seeing electric vehicles used more widely as company cars.
Which could make company cars the engine of e-mobility in Germany.
David Voggeser: Of course, that creates a whole new set of challenges for fleet managers. With traditional gasoline-powered vehicles, fuel costs were easy to calculate as vehicle-related costs. With electric vehicles, it is not so clear how – or indeed whether – the electricity used can be separated out as a cost item. Here, again, we expect to see approaches crystallizing in the near future.
You mentioned alternative logistics concepts in relation to company cars. What trends are apparent here?
Carsten Schlichting: Not everyone in the company has to have a company car for their exclusive use. Car pools are an growing trend, especially for middle managers and for business trips. The company has various vehicles in their car pool that staff can use as and when they require them. That means that each vehicle is used more often. The problems start, however, when you start combining private with business use.
… which is almost always the case with executives higher up the organization.
Carsten Schlichting: The latest trend is car sharing, found at a just a few companies at present. With car sharing, employees can use any of the vehicles offered by an external car-sharing company, located across the city. The company is charged for its employees' actual usage on the basis of distance or time. This reduces fixed costs, which are often high. But it only really works for employees in big city areas.
Will we be seeing changes in the vehicle types used as company cars? Companies are often very particular in their approach here.
David Voggeser: Companies generally set specific reference models for different hierarchical levels. Employees can then choose between these models. For example, typical reference models for the level immediately below Board level are the BMW 5-Series, Mercedes E-Class and the Audi A6. For the level below that, the reference models are typically the BMW 3-Series, Mercedes C-Class and the Audi A4.
Carsten Schlichting: As always, company cars must be suitable for their use in business situations, such as taking customers or business partners as passengers. But besides practical concerns, the vehicle's image also often plays a role.
So we won't be seeing executives driving beach buggies any time soon?
Carsten Schlichting: Quite. Often companies explicitly forbid certain types of vehicle as companies cars – sports cars, convertibles, sports coupés and RVs, for example.
David Voggeser: But things are changing. Until recently, SUVs were not allowed as company cars, partly because of their excessive fuel consumption. Nowadays, they are considered acceptable.