German economy to hit slowdown as auto industry ‘critical’ – ‘much worse’ than months ago | World | News

The Munich-based Ifo Institute warned that confidence hit a six-month low following prolonged shortages in September, dragging down the world’s biggest car industry. Ifo said: “The situation in Germany remains critical: order books fell from 17.1 points in August to 5.3 points [in September]. In July, the order book was still valued at 52.5 points.

“Demand is down for the first time since May 2020: the figure fell from 1.7 points to minus 15.7 points. Throughout the supply chain, companies deemed the stock of finished goods to be too high. »

A global supply and production issue surrounding semiconductors vital to the production of modern high-tech vehicles is largely to blame.

The indicators showed that confidence in the industry fell 32 points to just 13.2.

The gauge measures the difference between automakers’ optimism and pessimism regarding the production and distribution market. He was at a three-year high of 50 points as recently as July.

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Germany’s big three automakers, Daimler owner Mercedes Benz, Volkswagen and BMW have all been forced to cut production as chip shortages mean vehicles cannot be completed to the usual high specification.

In addition to confidence indicators on production and distribution, the tracking of pending production orders also fell from 17.1 points to just 5.3 in September as the reality of the shortage kicked in.

Ifo director Oliver Falck said the industry was “most seriously affected by bottlenecks in the supply of intermediates”.

There seems to be light at the end of the tunnel though in the form of exports.

Mr Falck told the Telegraph: “That shouldn’t hide the fact that the uncertainty of many consumers in China, due to the crisis at property developer Evergrande, is weighing on the mood of German automakers, which are now producing more than cars in China than in Germany.”

Automakers around the world fear that the shortage of semiconductor chips will last until 2023 following the impact of the COVID-19 pandemic on the supply chain.

According to a report by the Society of Motor Manufacturers and Traders, car production in the UK fell 27% year on year in April, as a combination of shortages and closures wreaked havoc at British assembly plants.

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The gross output value of the automotive industry in Germany is approximately 498 billion euros in total sales.

In 2019, around 3.49 million vehicles were exported, for around 217 billion euros to the European Union.

The industry employs around 809,000 people in Germany and accounts for around 10% of total national GDP.

With a new coalition government poised to replace outgoing Chancellor Angela Merkel, all eyes will be on whether talks between the Greens and the FDP will temper some of the Greens’ policies on vehicle emissions.

Matthias Schmidt, a Berlin-based auto industry analyst, told Politico: “Generally the auto industry is quite happy that it’s not red-red-green, because the FDP will put a damper on the plan of Greens for 130 kilometers – speed limits per hour on highways.

Andreas Scheuer, outgoing transport minister, is keen to protect the industry known to some as the backbone of the German economy, after telling the Bild newspaper that the synthetic fuel combustion engine would be “the engine of innovation ” in Germany.

With Brexit in place, the UK market has also had an impact on the German export industry, with the UK not among Germany’s top ten trading partners, partly due to trade barriers adding £600m in additional costs to UK importers, with German vehicles heavily included in the figure.