In Switzerland, cars are registered in the canton where the car owner resides, so most cars in a given canton bear the plates of that canton. However, there is one notable exception. Cars with plates from Appenzell-Innerrhoden (AI), Switzerland’s least populated canton, seem to pop up in large numbers everywhere. Why?
Some believe it might have something to do with differences in taxes and the cost of ensuring cars are roadworthy. But this is not the key reason. According to an RTS programme on the subject, the main reason is more prosaic.
Most car owners are forced by law to register their car where they live and cannot choose a different canton for their car. Rental car companies on the other hand are allowed to shop around.
Appenzell-Innerrhoden, with around 16,000 inhabitants, is Switzerland’s least populous canton. Appenzell-Innerrhoden is technically a half canton that was born from the division of whole canton of Appenzell along religious lines in 1597.
In 2014, RTS estimated that the number of cars registered in Appenzell-Innerrhoden exceeded the population by 10,000. The canton registers an estimated two thirds of all rental cars in Switzerland.
Administrators in Appenzell-Innerrhoden have decided to outshine other cantons on service and this is what primarily draws rental car companies to the canton for car registration. In Appenzell-Innerrhoden a new car can be registered online within a day, something prized by rental car companies that register thousands of vehicles every year.
There are some differences between what cantons charge to license a new car. In 2014, the average cost across all cantons was CHF 83 and ranged from CHF 55 to CHF 140. At CHF 60, Appenzell-Innerrhoden was at the low end of the price range, however, it wasn’t the lowest and was among eight other cantons charging CHF 60 or less. Speed and efficiency of service matters more than small price differences.
So why does the Appenzell-Innerrhoden car registry service strive to out compete other cantons to attract an oversized share of this administrative business?
The registry charges fees, money that supports jobs. The Appenzell-Innerrhoden registry also makes a profit. According to analysis published in 2014, the registry brings in CHF 1.60 for every franc it spends. Ticino brings in CHF 1.17 for every franc of cost. However, Ticino was charging CHF 140 to register a new car compared to CHF 60 in Appenzell-Innerrhoden. Appenzell-Innerrhoden’s efficiency allowed it to generate higher margins with much lower prices.
Other cantons are not particularly bothered by rental-car-registration competition from Appenzell-Innerrhoden because the road tax collected on rental cars is divided up and paid based on where rental car contracts are signed. So the cantons of Geneva and Zurich, with the largest airports, still get the majority of this money, despite most rental cars being registered in Appenzell-Innerrhoden.