Roaring Business

New car sales in Germany reached their highest level in seven years in 2006, the German Automotive Industry Association (VDA) said this week.

A total of 3.47 million vehicles were sold in the 12 months ending in December, VDA said. The four percent increase from the previous year's total was primarily a result of a surge in new car registrations in the last two months of 2006.

"Those were two fabulous months, but the results are exceptions to the automakers' normal sales levels," said VDA president Bernd Gottschalk.

New models, incentives and improved consumer confidence, especially among private customers, contributed to the development, VDA said. But there was also a rush to buy ahead of the country's value-added or sales tax (VAT) increase. Germany raised this tax by three percent to 19 percent as of January 1, 2007.

"Business was booming at the end of the year; the warehouses were emptied," Gottschalk said. "Now we have to hope that we don't get off to a rocky start in the new year."

Industry hopes positive trend will continue

For 2007, the market environment at the start of the year would be strained, especially by a reduced tax break for commuters and an additional hike in fuel prices, VDA said. The higher sales tax and insurance tax would also play a role.

"Now, everything depends on whether or not we've cleared the hurdle and can look forward to strong economic growth and improved consumer confidence," Gottschalk said. "There's certainly no lack of new models, and lots of consumers need to replace older cars."

Gottschalk said the average age of a passenger car in Germany was over eight years. This was older than ever before.

Exports remain strong

Exports reached a record high of 3.9 million vehicles in 2006, a 2.5 percent increase. Even on the US market, which registered a decline of 3 percent, German companies still succeeded in boosting their sales by six percent to 921,000 vehicles, VDA said.

In production, a total of 5.4 million passenger cars rolled off German automakers' assembly lines in 2006. This one percent increase represented a new production record and demonstrated the industry's domestic success, Gottschalk said.

"At the same time, the German automakers' 13 percent increase in production at plants abroad shows that they are playing an active role in the process of globalization," Gottschalk said.

VDA said it expected turnover to remain stable in 2007.