Car ownership rises as prices plummet
The cheapest cars are getting cheaper in Denmark and that is encouraging a higher vehicle ownership and challenging a culture that prides itself of bicycles and public transport.
According to Politiken newspaper, the cheapest car now available costs half what the cheapest car cost in the late 1980s.
This is due not only to mass-production of cheap microcars – cars less than 3.5 metres long – but also because these cars are subject to lower registration taxes.
As a result, car sales are breaking records for the third year running and over the past 12 months, 175,113 new cars have rolled onto the streets, a three percent rise on the previous 12 months.
But while the number of registered business and industry vehicles dropped by 20 percent, the number of privately-owned cars jumped by a massive 23 percent.
One of the major explanations is that the cheaper cars are made even cheaper because they are subject to a lower registration tax – car buyers have to pay 180 percent of the car's value for every kroner of the value over 162,000 kroner, and 105 percent of its value up to 162,000 kroner.
Cheap cars even cheaper
“We are now able to produce cheaper cars and the cheapest cars have dropped so much in price that they are only subject to the lower tax,” Ulrik Schönemann, the CEO of Volkswagen Denmark, told Politiken newspaper. “All of a sudden the cheapest cars have become much cheaper.”
Despite the rise in car ownership, there are still 500,000 fewer cars on Danish roads compared to similarly wealthy European countries and relative to its population, according to economist Lars Olsen from Danske Bank.
“Danes live close to each other and have a tradition for bicycling, but the most important explanation for the low number of cars is that our incomes are too low and that there is a very high tax on new cars,” Olsen told Politiken newspaper. “But the increasing popularity of cheap microcars means that tax will play a less important role. So we may start getting closer to a ‘normal’ number of cars.”