German new-car market to see ‘significant’ boost in second quarter

10 May 2023

The new-car market in Germany got off to a positive start in the second quarter of 2023, as it continues to show signs of a slow recovery. Registrations of new vehicles climbed 13% year on year in April to 202,947 units, according to the latest figures released by the Kraftfahrt-Bundesamt (KBA).

Last month’s increase was largely driven by commercial registrations, which rose 18%. Private registrations increased only slightly by 3%, making up 33% of the overall market share. In the four months leading up to April, a total of 869,800 new cars were registered, up 8% compared to 2022.

‘Compared to the previous year, new-car registrations are developing positively. We also expect a significant increase for the entire second quarter,’ said Reinhard Zirpel, president of the Association of International Motor Vehicle Manufacturers (VDIK).

He warned that the numbers are still down compared to previous years, adding that registrations are ‘far away’ from reaching pre-COVID-19 levels. Between January and April, new-car registrations dropped 27% compared to the 1.19 million vehicles registered in the same period in 2019.

The German Association of the Automotive Industry (VDA) has upgraded its annual forecast, citing positive developments such as supply chain improvements and carmakers’ abilities to reduce high order backlogs. The association is now projecting that the new-car market will grow 4% in 2023, equating to 2.76 million new vehicles.

Production improves but orders slow

In the past few months, the supply of key components for vehicle manufacturing has improved, aiding the slow market recovery. But the road ahead is still marked by uncertainties as buyers remain cautious about making big purchases.

Inflation eased somewhat in recent months and is expected to have dropped to 7.2% in April from 7.4% in March. But consumers are also acutely aware of the growing costs of living as energy and food prices remain high. Germany’s ifo Institute said that consumer spending will only recover slowly, cautioning that the economy remains divided.

‘The new-car registrations reflect the improved supply capacity rather than the actual market situation,’ added Zirpel. ‘The current low level of incoming orders shows a weakening desire on the part of customers to buy cars. We could feel the impact on new-car registrations in the second half of the year.’

A wider look at the automotive market reveals that order numbers fell again in April, with German carmakers reporting 8% fewer domestic orders compared to a year ago. However, production levels have continued to improve for the 12th month in a row. In April, 321,000 passenger cars rolled off the production lines, a 24% jump year on year.

The VDA highlighted that low levels of comparison need to be taken into account. In the first four months of 2023, just under 1.5 million passenger cars were produced. While this corresponds to a year-on-year increase of 35%, this figure is still down 13% on the same period in 2019.

‘The passenger car markets in Germany and Europe are developing somewhat better than expected, which is of course good news,’ said VDA president Hildegard Müller.

‘But you have to look at the whole picture. The reality is that the markets are still well below pre-crisis levels. Although the situation is slowly improving, the restrictions on intermediate and primary products as well as the high energy and raw material prices are dampening the necessary recovery.’

BEVs on a roll, but PHEVs take a hit

A reduction of electric-vehicle (EV) incentives is also impacting registrations. Subsidies for plug-in hybrids (PHEVs) are no longer available in Germany, with this powertrain type recording a significant decrease since the start of 2023 when incentives were dropped.

In the first four months of 2023, around 49,300 plug-in vehicles were newly registered, plummeting 45% year on year. In April, only 11,800 new PHEVs were registered, a year-on-year decline of 46%.

On the other hand, battery-electric vehicles (BEVs) continued to see dynamic growth. BEV registrations increased 34% last month – the equivalent of around 29,700 new cars – giving this segment an overall market share of 15%.

While all-electric vehicles continue to sell well, this trend cannot mask an overall decline seen among EV registrations. Since the start of the year, new EV registrations – including BEVs, PHEVs and fuel-cell electric vehicles – have seen a progressive decline. From January to April, 173,900 new EVs were registered, down 11% compared to a year ago.

Since the energy crisis began last year, analysts have voiced concern over how this will impact EV adoption and production costs. The VDA said that high energy costs remain an ongoing issue in the industry. ‘Energy costs must come down, a reduction of the electricity tax to the European minimum is overdue. All these points remain an important political task. Here we need more speed and determination,’ she said.