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Why has German car production hit a 22-year low?

Carmakers built just 4.7 million cars in Germany in 2019, industry data showed Monday, squeezing production to its lowest level since 1997 as US-China trade tensions sapped vital foreign markets.

Why has German car production hit a 22-year low?
New cars from Mercedes in Alhorn, Lower Saxony in August 2019. Photo: DPA

The powerful VDA carmakers' club said output had tumbled nine percent year-on-year, blaming “weaker international demand” for the fall.

The lower appetite from abroad comes on top of demanding technological change and tighter emissions restrictions complicating life for carmakers — long a pillar of Europe's largest economy.

READ ALSO: Car sector weakness saps industrial jobs in Germany

“The car industry faces a massive transformation,” in 2020, industry expert Stefan Bratzel of the Center for Automotive Management said.

A Mercedes Benz employee at a factory in Bremen. Photo: DPA

With consumer spending buttressing the domestic market even as economic growth slowed, new registrations of cars on German roads booked an increase of five percent, at 3.6 million.

But auto exports from Germany to the rest of the world fell even more sharply than production, tumbling 13 percent to 3.5 million.

“The fall in car production means Germany continues to lose significance in the global auto industry,” said Ferdinand Dudenhöffer of the Center Automotive Research.

Around the world, car markets have been battered by the effects of the American trade conflict with China.

Last year saw carmakers complain that falling global demand was eating into their business just as massive investments are needed in research and development.

'Hefty fines'

Companies are pumping cash into high-tech projects like automated driving, and switching focus to hybrid or all-electric vehicles from internal combustion engines as they race to meet new emissions limits.

From next year, carmakers must achieve average carbon dioxide (CO2) emissions of 95 grammes per kilometre across newly-sold vehicles in the European Union, on pain of hefty fines.

“The atmosphere is comparable to when cash was switched over from Deutsche Marks to euros on January 1st, 2002,” Der Spiegel magazine wrote citing industry insiders.

“The EU's CO2 legislation is the most important reason” for the big changes set to sweep the car industry, analyst Bratzel said.

Jobs under threat

CO2 limits and other structural factors threaten the auto firms' pride of place in the German economy.

Where in 1998 close to 12 percent of all cars sold worldwide were produced in Europe's powerhouse, the share has shrunk to below six percent in 2019, Dudenhöffer said.

Meanwhile electric motors require less manpower to assemble than their hydrocarbon-burning predecessors, threatening some of the roughly 800,000 car industry jobs in Germany.

Also Monday, figures from the KBA transport authority showed SUVs overtaking compact cars as the most popular class of models on the domestic market.

Greenpeace protesters stand outside the Frankfurt car show in September – in which new SUV models were unveiled – with a sign reading “Transportation turnaround without climate killers'. Photo: DPA

Many SUVs are built not in Germany but in factories operated by the country's multinational carmakers overseas.

READ ALSO: Berlin horror crash prompts growing calls to ban SUVs from German cities

That in turn makes the companies more vulnerable to upsets in international
trade.

In a study published in December, Dudenhöffer forecast that German car production would begin growing again in 2021 after bottoming out this year.

“A fall in sales of three to five percent looks likely” in 2020, consultancy EY judged in a study published Monday.

But “manufacturers have a strong interest in powerfully boosting sales of electric and plug-in hybrid cars from now on… that should be reflected in the statistics at the latest by the middle of the year,” EY added.

By Tom Barfield

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WORKING IN GERMANY

7 tips for how to survive as a freelancer in Germany

Taking the decision to go it alone and freelance in Germany can be a daunting prospect. But, if you do it right, it can be an exciting and liberating path. Here are some of our top tips on how to survive.

7 tips for how to survive as a freelancer in Germany

1. Get a tax advisor

The German tax system is complicated, even for Germans. All the associated paperwork uses the Amtsprache (authority language) which is more like legalese than ‘normal’ German, and mistakes when filling out tax forms can cause you, at best, a massive headache and, at worst, a costly fine. So it’s best that you employ someone who knows what they’re doing to help you out.

That person is called a Steuerberater (tax advisor) in Germany. They will help you register with the tax office, correspond with them and submit your tax declarations.

Be aware that, in Germany, different deadlines apply for tax returns depending on whether you employ an official tax advisor or not. If you are doing the tax return on your own, the deadline for submitting your annual tax return is earlier than if you use a tax advisor’s services. 

READ ALSO: What NOT to do when you’re freelancing in Germany

When looking for a tax advisor, a top tip is to use your network to get recommendations. Ideally, you want someone who will do more than just fill in the forms for you, but who will actually advise you on how best to manage your business finances so that you can make tax savings.

2. Keep your accounting in order

The better you keep your own accounts in order, the easier it will be for your tax advisor to compile your tax declarations and therefore the cheaper their services will be.

As a freelancer, there are a lot of costs you can deduct from your taxes – from train tickets, working materials, to meals out – so it’s best to keep hold of all your receipts and to keep them in good order.

2 euros and 50 cents lie on a receipt in a beer garden. Photo: picture alliance/dpa | Peter Kneffel

In Germany, you’re obliged to keep hold of receipts for two years, in case of a tax inspection, so it’s a good idea to photocopy the type of machine-printed receipts you get from restaurants so that they stay legible for a long time.

There are also a few things to be aware of when writing your own invoices. Firstly, make sure that you include your tax number. This isn’t the 11-digit Steueridentifikationsnummer that everyone gets when registering in Germany, but the 10-digit Steuernummer you get from the Finanzamt after registering yourself as a freelancer. 

Most companies won’t pay you if you don’t have this on your invoices so make sure you include it.

You should also make sure that you number your invoices properly – ideally in ascending order so that you can easily keep track of them. You are not allowed to issue two invoices with the same number and if you do so and the finance office notices, you could face an inspection of your whole accounting system.

There are numerous great accounting software programmes you can use to help you, such as Lexoffice and Sevdesk and, even if you have to pay for them, the costs will be tax deductible!

3. Find out if you’re eligible for financial support

In Germany, there are several opportunities for freelancers to gain financial support and to cut their outgoings, and its worth finding out if you’re eligible for them.

If you’re claiming unemployment benefits under ALG 1 and are thinking about becoming a freelancer, the employment office offers a special type of financial support to help you to get your freelance business off the ground.

Called the Grundungszuschuss (“foundation grant”) the payment is a six-month grant equalling your monthly entitlement under ALG 1 plus €300 towards your insurance costs can be applied for those in receipt of this unemployment benefit.

READ ALSO: Will freelancers benefit from Germany’s €300 energy allowance?

If you are engaged in some form of artistic profession in Germany – which can include journalism to pottery – you may be entitled to membership to the Kunstlersozialkasse (artists’ social insurance).

Being a member of the KSK means you only have to pay half of your health insurance and pension contributions, and the KSK will pay the rest.

4. Work out how much you think you will earn

As with starting any business, you need to have some idea of your expected earnings from the outset.

If you’re just starting out as a freelancer, or have some freelance gigs on the side of an employment position, then it might be worth considering registering yourself as a Kleinunternehmer (“small business”).

As a Kleinunternehmer, you can currently earn up to €22.000 per year without having to charge VAT and having to submit only yearly tax declarations. 

An income tax declaration form lies on a table. Photo: picture alliance/dpa/dpa-Zentralbild | Hans-Jürgen Wiedl

Be aware that if you are registered as this kind of freelancer, you must include the following sentence in your invoices: ‘Gemäß § 19 UStG wird keine Umsatzsteuer berechnet’ which means ‘In accordance with Paragrah19 of the German VAT law, no VAT has been added to this invoice.’

READ ALSO: Everything you need to know about your German tax return in 2022

If you think you will earn more than €22.000 per year, you will need to pay Umsatzsteuer (VAT) and will have to submit tax declarations in advance and more often. Depending on how much you earn, this could be every month or every quarter. 

5. Get your insurance in order

In Germany, it’s a legal requirement to have health insurance.

If you’ve just made the move from employment to being a freelancer and want to keep the same health insurer, you should get in contact with your health insurance provider straight away to tell them about your change of circumstances. They will ask you to re-register and to tell them your projected freelance earnings for the year, so they can amend your monthly fees.

If you don’t keep your health insurer provider updated, you could continue to be charged the higher rate that you had from your previous salary.

The insurance cards of the health insurance companies DAK, AOK, Barmer and Techniker-Krankenkasse TK lie with euro notes under a stethoscope. Photo: picture alliance / dpa | Daniel Karmann

It’s not just health insurance you need to think about as a freelancer. It’s also wise to think about protecting yourself from any sort of claims that could arise as a result of any working mishaps. 

If, for example, you lose your laptop which contains confidential client information, you need to be protected against claims.

That’s why it’s good to have both Betriebshaftversicherung (business liability insurance) and Rechtschutzversicherung (legal protection insurance).

6. Plan your time wisely

All of these bureaucratic obligations take time. So it’s really important that you take account of that when planning your time. For example, planning half a day a week to deal with your invoices, filing, emails to clients, and conversations with authorities can be really beneficial when scheduling your working time. 

7. Grow your network

As a freelancer, networking is absolutely crucial to success. 

Keep an up-to-date profile on websites like LinkedIn and German equivalent XING and keep in contact with anyone you’ve ever worked with, no matter how brief the contact was. 

Having a network is not only about getting more clients, but also about building a support network in your field to exchange advice, tips and generally for your own enrichment. 

Participating in workshops related to your field, going to seminars, and meet-ups, can be great ways of broadening your network. 

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