The last 1.5 years have been eventful for Europe’s largest car market. “Eventful” may sound like a nice way of saying that German car brands are the centerpiece of one of the largest scandals in automotive history, but there was more positive news as well. The theme that ties together the good and the bad headlines emanating from Germany is that the car market is changing, from diesel engines—the German car industry’s bread and butter—to electric motors.
It all started with Dieselgate. The scandal broke on September 18, 2015, and was centered on Volkswagen Group, Germany’s largest car manufacturer (of brands including Audi, SEAT, Škoda, Porsche, and VW, among others) and supplier of roughly a quarter of new cars in Europe. The revelations of systematic cheating ushered out members of the company’s leadership and ushered in the Volkswagen Group’s new strategy revolving around electric vehicles (EVs) and mobility services.
Less than a year later, on May 18, 2016, the German government announced the country’s first substantial fiscal incentives for EVs. (Yes, there were fiscal incentives for EVs before, but they were minuscule compared to leading European EV markets.) More recently, four car manufacturers—three of which are German—decided to join forces to begin constructing a network of 400 fast-charging stations for EVs across Europe in 2017, with “thousands” to follow by 2020.
Following these events, you would probably expect three things to happen with new car registrations in Germany: (a) the Volkswagen Group’s market share drops, (b) the share of diesel vehicles declines, and (c) the EV market share increases. Which is what happened …to some extent.
Let’s first look at the aftermath of Dieselgate. The figure below shows the monthly new car market shares of Volkswagen Group brands and diesel vehicles in Germany from 2012 to November 2016. Because the data are quite noisy on a monthly basis, we added 12-month rolling averages to even out monthly and seasonal trends.
Market share of Volkswagen Group brands and diesel vehicles of new car registrations in Germany (source: Kraftfahrt Bundesamt).
Looking at the chart, it’s clear that the VW market share is down. Based on the 12-month rolling mean, VW’s share declined from 22% to 20% after they were caught cheating in the United States. Interestingly, market shares of other Volkswagen Group brands remained more or less stable, even though Audi vehicles were also affected by the initial uncovering of the defeat devices at the Volkswagen Group. The defeat device that triggered Dieselgate even originated at Audi, and the California Air Resources Board recently revealed another defeat device in Audi vehicles.
The diesel share among new cars in Germany decreased to 46% after hovering around 48% for 4 years. This development obviously isn’t an instantaneous collapse of the diesel market, but the trend is pointing downward. Interestingly, VW’s diesel share isn’t declining any faster than the diesel share of other manufacturers. One explanation is that Dieselgate tarnished the reputation of diesel technology as a whole, leading three European capitals—Athens, Madrid, and Paris—to ban diesel vehicles by 2025 and causing the German government to allow towns and cities to ban old (non-Euro 6) diesel vehicles.
Next, we explore how the German car market reacted to the new incentives for EVs. The graph plots the market share of hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), and battery electric vehicles (BEVs) from 2012 to November 2016. PHEVs and BEVs are awarded a subsidy under the new incentive program—3,000 and 4,000 euros, respectively—whereas HEVs receive no subsidy.
Market share of electric powertrains of new car registrations in Germany (source: Kraftfahrt Bundesamt).
Oddly enough it’s the HEVs that are off to the races after EV subsidies were introduced. Again, these vehicles do not receive any subsidy. There is also a notable spike in BEV registrations at the end of 2015, which can be explained, at least in part, by a large number Kia Soul vehicles being registered in Germany and immediately exported to the thriving EV market in Norway. This trick helped Kia meet the European Union’s 2015 CO2 standard, but it delivers no benefits in Germany.
Despite this distraction, the monthly registrations of both BEVs and PHEVs seem to be slowly picking up, with the technologies together accounting for roughly 1% of new registrations in September, October, and November. This share is still much lower than in leading European EV markets, but the trend is pointing upward.
So, we observed three developments: (a) VW sales are down, (b) diesels are less popular now than they were 2 years ago, and (c) there are some indications that the German car market is starting to react to EV subsidies. Despite this progress, it’s obvious that these changes aren’t happening at a break-neck speed, and several questions remain, including whether diesel sales will continue to fall and to what extent EVs can fill the void left behind by waning diesel sales. Nevertheless, it seems like the events of the last 1.5 years are changing the German market.
For more information, check out our newly released 2016 Pocketbook of European vehicle market statistics. The Pocketbook covers vehicle sales, CO2 emission figures, technology shares, and a host of other information on the European vehicle market. You will also find regular updates on EV and diesel market shares on our new and improved Pocketbook website, so keep checking there for this kind of content.