The command line tool sqlcmd.exe is well known in the world of a Microsoft (SQL Server) developer.
Normally you will execute SQL scripts using the following syntax:

sqlcmd.exe -E -S <your_server> -d <your_database> -i <your_script_file>

Everything is ok as long as the script file does not contain german characters like ä, ö, ü and so on.
Otherwise you will encounter a problem with these special characters which ends up with malformed characters in the database.

The solution is simple, but as far as i known, not documented.

The input file which you specify with the -i parameter at the sqlcmd.exe command line tool takes UTF-8 encoded files.

All other script file with a different encoding end up with the same problem when you have german special characters included.

So ensure that your SQL script files are always saved as UTF-8 and it will save your day.