German new-car market off to a weak start in 2023

07 February 2023

The market for new cars in Germany closed 2022 on a high note as electric vehicles (EVs) pushed up registration figures. But this upward trend did not continue into the new year as the latest data from Germany’s Kraftfahrt-Bundesamt (KBA) reveals 2023 is off to a weak start.

In January, new-car registrations declined 2.6%, breaking the pattern of five months of consecutive growth seen in the second half of 2022. A total of 179,247 new passenger cars were registered last month – the second lowest level of registrations seen in the month of January since 1991. Compared to pre-pandemic 2019, this figure is down 33%.

Meanwhile, the seasonally-adjusted annualised rate (SAAR) plummeted from 4.21 million units in December to 2.51 million units in January. Autovista24 projects slow growth of 3.3% for the year, with the German new-car market expected to record 2.79 million units in 2023, not least because of lower order intake. Domestic order intake was down 37% year on year among German car manufacturers in January.

EV slump

The drop in registrations is linked to changing incentives for EVs. Germany recently reduced its EV incentives, with the government ending subsidies for plug-in hybrids (PHEVs) on 31 December 2022. It also lowered subsidies for battery-electric vehicles (BEVs). This had a direct impact on the new-car market in January as around 27,000 new EVs were registered, a sharp year-on-year fall of 32%.

While BEVs outnumbered PHEV registrations at 18,136 units last month, this figure is still down 13.2% compared to January last year. A total of 8,853 PHEVs were registered in January, with this number plummeting 53.2% year on year.

Overall, electric vehicles only achieved a market share of 15.1% in January. In December, this figure was considerably higher at 55.4%, while the EV share averaged 31% over the course of 2022. The association of international motor vehicle manufacturers (VDIK) said that the weak start to the year had to be seen in context, as December 2022 proved to be a strong month, especially for EVs.

‘The cut in EV subsidies in 2023 is leaving a clear mark. We fear that the previous momentum is over for the time being,’ said Reinhard Zirpel, VDIK president. He added that the new-car market is expected to ‘turn positive’ later this year because of improved delivery capacities.

Similarly, the central association of the German motor trade (ZDK) said the decline in EV registrations at the beginning of the year was to be expected. ‘The slump in registrations for plug-in hybrids is due to the expiry of subsidies from 1 January,’ said ZDK vice president Thomas Peckruhn. ‘Even in the case of BEVs, in addition to the lack of available vehicles, there is also greater reluctance from customers due to reduced incentives.’

German production on the mend?

Production continued to increase in January, following on from the months of growth seen last year. Around 329,000 passenger cars rolled off the country’s assembly lines last month, an increase of 31% year on year. This was in part due to an additional working day, with a slight improvement regarding supply bottlenecks also playing a role.

However, production is still not able to hit pre-pandemic levels. Compared to January 2019, car production is down 12%. Manufacturers in the German automotive industry are still grappling with raw material shortages. A recent survey by Munich’s ifo Institute shows that three quarters of companies in the industry report continued bottlenecks.

Germany’s automotive industry association, the VDA, warned last month that Europe needs to ensure the supply of critical raw materials. It also cautioned that Germany – Europe’s largest automotive market – could lose out in the long term internationally if no action is taken. The association said that a clear political commitment is needed to secure the country’s future as a favourable industrial location.

‘Without an ambitious program for competitiveness and location promotion, we risk losing the connection globally, with negative consequences for prosperity, employment, and climate protection,’ said VDA president Hildegard Müller.

Media reports suggest that some manufacturers in the country are looking to cut jobs, including Ford. The carmaker is expected to decide by mid-February how many jobs to cut. Other brands, including China’s BYD, are reportedly showing interest in one of Ford’s German sites. The American carmaker, however, is declining to respond to these reports.

‘We have no comment on the current speculation about a possible restructuring at Ford in Europe. Ford remains committed and is currently accelerating its plans to build an all-electric portfolio of vehicles in Europe. This transformation requires significant change in the way we develop, build, and sell Ford vehicles, and will impact our organisational structure, talent, and skills we will need in the future,’ the company told Autovista24.