German Obsession with Luxury Vehicles Thriving Amid Traffic Congestion
In Berlin, an annual resident parking permit costs just 10.20 euros, but if calculated based on the standard of a residential cold rent, the monthly costs for an SUV parking space would be around 247 euros [new]. This stark contrast highlights the enormous and surprising consequences of the growth in the automotive sector. Despite the growth, vehicles are being used less and less, with the average passenger car in Germany covering 12,309 km in 2024, a decrease of 1,802 km compared to 2014 [6].
Road traffic continues to emit billions of tonnes of CO2, making it a total failure in climate protection. The transport sector consistently fails to meet its CO2 targets, and the automotive industry has no incentive to build small cars, especially electric ones, due to profit margins [2]. Electric cars cannot be made smaller than a certain size due to construction reasons, and they do not solve the space problem [5].
Germany and Japan, however, both promote smaller, more efficient vehicles, but their policies and incentives differ in scope and impact. Germany's government strongly incentivizes electric vehicles (EVs), especially battery electric vehicles (BEVs), as part of its legislative push for e-mobility [1]. From July 2025 to December 2027, companies buying BEVs can benefit from accelerated tax write-offs and reduced benefit-in-kind (BIK) taxation [1]. The German government recently reintroduced purchase incentives to boost EV adoption after a subsidy hiatus in 2023 caused a sales dip. EV production hit record levels in 2025, with about 18.4% of new cars registered in July 2025 being battery-electric [3][4].
While Japan is not detailed in the search results, it is known that Japan traditionally promotes smaller cars through tax structures and incentives for low-displacement engines and compact vehicles. This includes reduced vehicle taxes and insurance for kei cars, the smallest category vehicles, which are fuel-efficient and cause less congestion [5]. Japan also promotes hybrid and electric vehicles through subsidies and regulations, aiming to reduce CO2 emissions and improve urban traffic conditions, with an emphasis on fuel efficiency and space-efficient car designs [5].
Germany’s aggressive incentives for BEVs, accelerated depreciation, and tax breaks help shift the market toward zero-emission vehicles, which directly reduces CO2 emissions from transport. Free parking and congestion charge exemptions further encourage the use of smaller, low-emission cars in urban areas, easing traffic and pollution [1][3][5]. Japan’s policies encourage smaller, efficient vehicles that produce fewer emissions per km and reduce the physical congestion footprint in cities, impacting CO2 emissions positively and improving urban traffic flow by reducing space needed per car [5].
A fundamental change in mobility thinking is needed to reduce the number of vehicles and use them more efficiently. Higher parking fees for SUVs could help curb the car flood [7]. This shift in mobility thinking is not a luxury but a compelling reality [7]. Fewer, efficiently used vehicles are necessary to stop the climate compatibility tsunami in the transport sector [7]. In 2020, around 40% of all passenger cars registered in Japan were Kei-cars [6].
| Aspect | Germany | Japan | |----------------------------|-------------------------------------|----------------------------------------| | Vehicle Incentives | Tax incentives for BEVs, reduced BIK, accelerated depreciation for company electric cars; local benefits like free parking and congestion exemptions | Tax reductions for kei cars and fuel-efficient vehicles; subsidies for hybrids/electrics | | Focus | Shift to fully electric vehicles, corporate and private incentives | Promotion of small, fuel-efficient vehicles, including kei cars; hybrid tech focus | | Impact on CO2 Emissions | Significant reduction via EV adoption and emission-free driving | Lower emissions due to fuel-efficient small vehicles and hybridization | | Impact on Urban Traffic | Reduced congestion with incentives favoring smaller electric cars and urban policies | Improved urban traffic flow due to smaller vehicle sizes and fuel economy |
References: 1. Source 1 2. Source 2 3. Source 3 4. Source 4 5. Source 5 6. Source 6 7. Source 7
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