Situation in Germany’s Automotive Industry Remains Positive, Though Expectations Worsen

The business situation has improved for German automotive manufacturers and for their suppliers in particular. This is according to the ifo Business Survey. The indicator rose to 28.4 points, up from 23.5 points* in April. “However, the data trend indicates that a turning point is coming because the expectations for the months ahead are consistently pessimistic,” says ifo industry expert Anita Wölfl.

In contrast to German manufacturing as a whole, the country’s automotive industry remains positive about its current business situation. Among automakers, the situation improved to 27.5 points in May, up from 23.8 points* in April. For suppliers, that figure reached as high as 43.1 points in May, up from 35.1 points* in April. “What really stands out is the companies’ assessment of their profit situation, which they rate every six months as part of the ifo Business Survey,” Wölfl says. For example, suppliers had a positive take on their earnings situation for the first time in two years. While this counts as good news, they will also need a solid profit situation if they are to master the challenging transformation process happening in the industry.

The companies surveyed were, however, pessimistic about the months ahead. In the automotive industry as a whole, business expectations fell to minus 14.1 points in May, firmly in negative territory, after being just inside the positive range at the beginning of 2023.

One clear challenge here is the international competitive situation. According to the ifo Business Survey, automotive manufacturers and suppliers consider themselves relatively well positioned in Germany and in other EU countries. But looking outside Europe, they rate their competitiveness far more negatively. Here Wölfl points to, among other things, the might of Chinese manufacturers of electric vehicles, which are making deeper and deeper inroads into the European market.

*Seasonally adjusted