New mobility and old laws: The modernization of Germany’s regulatory framework for mobility services

Germany is traditionally a country where the preferred mode of transportation for personal use is the private car. As a saying goes from the south of Germany where the car industry is strong: A house is a house if there is a car park. By way of contrast in metropolitan areas, the number of car owners is dwindling and providers of new and innovative mobility solutions are on the rise. Having neglected these trends for many years, the legislator has been much more active in recent times. First, a draft regulation governing the use of e-scooters on public roads was finally published, the so-called Personal Light Electric Vehicles Regulation (Elektrokleinstfahrzeuge-Verordnung). Secondly, the Minister of Transportation announced amendments to the German Passenger Transportation Act (Personenbeförderungsgesetz) to meet the developments of modern ride hailing services and transportation network providers. Finally, a law providing for the set-up of car parks exclusively designated for car-sharing vehicles, the Car Sharing Act (Carsharinggesetz), was passed.

1. Personal Light Electric Vehicles Regulation

E-scooters as seen on the sidewalks from California to Vienna were literally illegal in Germany, as the stringent German regulatory framework did not provide for a vehicle that is neither a child’s toy (as it features an engine) nor an e-bike (as it features no seat). Eventually the Minster of Transportation submitted a draft bill dealing with the intricacies of admitting e-scooters to public roads. Before it comes into force, the Regulation still has to receive approval of the Bundesrat (Federal Council) that will debate the regulation on May 17.

1.1 Why is the new Regulation necessary?

In general, German law requires that any engine-powered vehicle must be approved by the German Vehicle Authority (Kraftfahrtbundesamt). For vehicles that are produced in a substantial number, e.g. production cars, a so-called general type of approval is necessary, the requirements of which are provided by different EU regulations.

Whilst there are multiple EU regulations for all types of vehicles from cars to tractors to fire trucks, there is no regulation that provides for a two-wheeled vehicle that is neither an e-bike nor a motorcycle because it lacks a driver’s seat. For want of a prevailing EU-type approval, the German Vehicle Authority may grant a national type approval, provided that an appropriate approval regulation is in place.

Whilst other cities like Vienna contented themselves with simply stating that e-scooters are equivalent to bikes in the context of the Road Traffic Act, the German Ministry of Transportation submitted a 50-page draft Regulation that exemplifies the German fondness for both vehicles and regulations.

1.2 What are the requirements for approval under the Regulation?

The Regulation provides that e-scooters must feature:

  • top speed of at least 6 km/h and up to 20 km/h
  • engine power of no more than 500 Watts
  • maximum weight of 55 kg
  • a vehicle insurance
  • two independent brakes
  • vehicle lighting such as headlamps, rear lamps and side reflectors
  • a bicycle bell or similar signaling device

1.3 Who is allowed to ride e-scooters and where are e-scooters permitted?

The Ministry opted for a two-class system of approval depending on the top speed of the e-scooter model:

6 – 12 km/h top speed:

  • Riders 12+ years are allowed.
  • Inside built-up areas: permitted on sidewalks and shared sidewalk / cycle lanes. If neither is provided, use is permitted on cycle lanes and even on the road.
  • Outside built-up areas: permitted on sidewalks and shared sidewalks / cycle lanes. If neither is provided, use is permitted on cycle lanes and hard shoulders. 

12 – 20 km/h top speed:

  • Riders 14+ years are allowed.
  • Inside built-up areas: permitted on cycle lanes. If no cycle lane is provided, use is permitted on the road.
  • Outside built-up areas: permitted on cycle lanes and hard shoulders. If neither is provided, use is permitted on the road.

There are some notable aspects to this differentiation:

  1. Given the risk of accidents involving e-scooters, the introduction of two categories of e-scooters seems sensible.
  2. The 12 km/h-version is permitted on sidewalks, whereas riding the 20 km/h-version is not permitted on sidewalks or pedestrian zones that are common in city centers. This seems counter-intuitive considering that e-scooters are the ideal mode of transportation in metropolitan areas. However, the Regulation provides for an exemption permit for which operators of free-floating e-scooter rentals can apply. In addition, the authorities may release certain areas for the use of e-scooters using the following street sign:
  3. The regulation also states that riders must adapt their speed to walking speed (7-10 km/h) if riding on sidewalks, in pedestrian zones or shared lanes. Since the 12 km/h-version of e-scooters is exclusively permitted on sidewalks, the effective speed limit is down to 10 km/h.
  4. Riding the “fast” e-scooter model (>12 km/h top speed) on the road outside of built-up areas seems a rather dangerous manoeuver taking into account that all other vehicles will zoom by at 100 km/h which is the general speed limit.

1.4 What are the sanctions for violating the Regulation?

Together with the draft bill comes an update to the catalogue of fines of the Road Traffic Act. Here are some of the most relevant fines:

  • Riding un-approved e-scooter: 70 EUR fine for the rider and the owner as a rare example of owner liability
  • Riding an e-scooter without proper lighting: 20 EUR (rider only)
  • Riding an e-scooter without a proper bicycle bell: 15 EUR (rider only)
  • Riding an e-scooter in violation of any other safety requirement (e.g. no brakes): 25 EUR (rider only)
  • Riding an e-scooter in a traffic area where riding is not permitted (depending on e-scooter version, see above): 15 EUR (rider only)
  • Riding e-scooters side-by-side: 15 EUR (rider only)

1.5 Final Remarks

The PLEV Regulation is a German solo run. In spite of this there is an initiative to draft a harmonized type approval on European level that will allow e-scooter manufacturers to distribute their e-scooters all over Europe, the Ministry of Transportation opted for a far more extensive regulation than any other European Member State.

However, the Regulation does not address all remaining issues. First, safety requirements were dropped during the legislative process such as the requirement of a driving license and mandatory helmets that might be recommended at least for children. Secondly, the scope of the Regulation does not cover all other kinds of PLEV such as e-skateboards, onewheel, monowheels and so forth. Also, e‑scooters sold prior to the enactment of the Regulation are unlikely to comply with its requirements and will remain un-approved. Lastly, the Ministry missed a chance to provide guidelines for the upcoming providers of e-scooter rentals concerning liability, parking and integration into the existing public transportation system. In particular, the last aspect might pose substantial challenges as multiple traditional public transportation providers announced banning the carriage of e-scooters.

2. Updates to the Passenger Transportation Act

The advent of app-based ride-hailing services revealed an inflexibility of the German Passenger Transportation Act (hereinafter: “PTA”). Whilst the PTA generally differentiates between public transportation providers (bus, tram, metro) on the one hand and licensed taxi operators on the other hand, ride-hailing services offered by transportation network providers do not fall into that scheme.

2.1 How can transportation network providers operate under German law?

At present, transportation networks are permitted under any of these three models:

  1. the experimentation clause for innovative public transportation services (cf. sec 2 (7) PTA),
  2. as a regular service in cooperation with a local public transportation operator or
  3. a form of car rental service (cf. sec. 49 (4) PTA).

Each of these provisions comes with substantial downsides. First, permissions granted under the experimentation clause must be limited to a period of four years. Secondly, cooperation with local operators is only viable for a limited number of providers in one city. Lastly, prominent providers of car-hailing services used to operate as a form of rental car service. However, several lawsuits later, we learned that the requirements of the PTA for the permission of car rental services are applied rigorously. In particular, rental cars (with driver) must comply with the following rules: They

  1. must return to the operator’s place of business when idle,
  2. must not pick up passengers from the street,
  3. the customer must rent the car as such which excludes car pooling by renting individual seats and 4. the customer must determine the directions of the route.

2.2 Why is regulation so rigid in Germany?

Historically, the taxi business has been heavily regulated in Germany. The German Federal Constitutional Court even elevated the taxi business to a service of general interest. The regulatory environment stems from the idea that unhampered competition was not viable in the taxi business. The reasoning is that there are substantial sunk costs for the investment in vehicles and training of taxi drivers (e.g. memorizing hundreds of street names and routes). Unhampered competition and an oversupply of taxis in the market could lead to a drop of taxi fares down to variable costs (i.e. costs of gas) so that operators could not recover their upfront investment in vehicles, maintenance and training. This ruinous competition will force taxi operators out of the market until the last surviving operator becomes a monopolist and sets fares at will. To avoid that outcome, the legislator opted for the regulation of market entrance (concessions) and taxi fares.

Against that background, the strict rules on car rental services are a consequence of the protection of the taxi business from competition. The current form of the Public Transportation Act is a response to a phase of disruptive competition experienced during the 1970s : With the introduction of CB-radio in rental cars, the drivers no longer needed to return to the operator’s place of business to receive instructions on the next ride but could receive instructions via radio saving a a detour. This however brought rental cars into fierce competition with the taxi business which up until then had had the privilege of roaming the streets to pick up passengers. To ease competition, the legislator introduced the obligation of rental cars to return to the operator’s place of business when idle (see above).

2.3 What do we know about an upcoming reform?

Recently, plans of the Minister of Transportation made public the aim of opening up the requirements for car rental services to provide for the needs of transportation network providers. According to a white paper issued by the Ministry of Transportation these changes to the law shall entail that

  • rental car drivers must no longer return to the operator’s place of business when idle;
  • operators may rent individual seats within the car for the pooling of passengers and
  • the customer must not determine the directions of the car. Instead, an algorithm may calculate the optimal route and/or calculate the route for the pooling of passengers.

However, there are still several aspects that show the legislator’s reluctance to submit to the principle of unhampered competition by granting open access to the metropolitan transportation market:

  • Taxi services are subject to the reduced VAT rate opposed to rental car services and (presumably) transportation network providers.
  • The permission to operate a transportation network can be refused based on the prohibition of “cherry picking” of individual profitable lines of the existing public transportation system.
  • Transportation network providers are not allowed to use designated taxi drop off and pick up zones at train stations or airports.

2.4 Final remarks

To sum up, the suggested liberalization of public transportation is a step in the right direction. However, more is needed to help innovative businesses to unfold the advantages of digitization. In particular, the economic circumstances that might have justified the regulation of the taxi business in the past have changed. The myth of “sunk costs” caused by the investment in vehicles and training is outdated: Although investments of time and money might still be substantial, these costs are not “sunk” as the car can be sold or employed elsewhere and driver training is simplified. For example, several supervising authorities dropped the requirement of local knowledge in consequence of the introduction of smart phone based navigation. Even the argument, that regulation and concessions are needed to guarantee the quality of the service no longer holds true considering the widespread use of app based rating systems to punish poor service.

3. Car-Sharing Act

The so-called Carsharinggesetz (Car-Sharing Act of 5 July 2017) provides benefits to users of car-sharing services to simplify and encourage their use. The German legislator did not only cater for the need of moving traffic but also – which is likewise important – for the parking of cars or more accurately: free car parks for the growing number of car-sharing vehicles.

The Car-Sharing Act differentiates between two different types of car sharing. First, with the introduction of the new parking sign

the municipal authorities may set up priority parking for drivers of vehicles that belong to a free-floating car-sharing service. However, although the street sign is already designed it is not yet in effect, as the draft amendment to the traffic regulation implementing that sign still has to pass the Bundesrat (Federal Council). In consequence, almost two years after the Carsharing Act came into effect the authorities are still reluctant to set up designated car parks.

Secondly, individual providers of station-based car-sharing services may apply for a special permit to set up car parks on public roads reserved exclusively for their fleets. However since the Carsharing Act is a federal law, this special permit cannot be based on the Carsharing Act but presupposes state regulation of each individual Bundesland (federal state) that implements the Carsharing Act. So far not all federal states have enacted such regulations.

Ultimately, the federal legislator’s initiative to eliminate parking issues in crammed metropolitan areas as the bottleneck of car-sharing service is a commendable step in the right direction. However, the momentum must not stop here and all parties ­– in particular state legislators and local authorities – should contribute to find a workable solution.