Current Situation and Future Prospects in the German Automotive Industry
The Munich-based Institute for Economic Research (Ifo) has announced the latest status of the German automotive sector’s business climate index. This index, which was minus 28,6 points in October, fell by 3,5 points to minus 31,1 points in November. This data reveals the difficult conditions the sector is in and the pessimistic expectations for the future. The sector’s current situation index also showed a significant decline, falling to minus 33,9 points in November. This shows that companies in the automotive sector evaluate their current business situation quite negatively.
Job Prospects and Employment Issues in the Automotive Industry
Companies in the German automotive sector are also pessimistic about future job prospects. The job prospects index, which was minus 28,2 points in the past, rose to minus 30,4 points in November. This shows that companies are drawing a worse picture of the coming months. According to the Ifo statement, the main reason for the pessimistic mood in the automotive sector is weak demand and a decrease in labor demand. The employment prospects indicator, although slightly higher than the previous month, fell to its long-term low of minus 34,1 points.
Foreign Trade and Export Expectations
The election of Donald Trump as US President, who threatens with high import tariffs, creates uncertainty for the automotive sector. However, the export expectations barometer of the companies participating in the survey increased from minus 31,3 points in October to minus 19,2 points in November. This increase shows that the sector has a more positive outlook on foreign trade. Experts say that the automotive sector is being squeezed by factors such as extensive transformation, intense competition and a weak economy.
Challenges Facing the European Automotive Industry
German carmakers are struggling with high costs in the transition to electric vehicles, while also having to cope with weak demand from China and Europe. Increasing competition from Chinese manufacturers, combined with historic layoffs and factory closures by German automakers like Volkswagen, are further increasing pressure on the sector. Volkswagen is planning to close a factory and lay off workers in Germany for the first time due to high costs.
The Layoff and Restructuring Process
Automotive companies in Germany are cutting jobs as part of their restructuring processes. Volkswagen, Bosch, Continental and ZF Friedrichshafen are among the companies that will cut jobs. Schaeffler announced on November 5 that it will cut 4 jobs, 700 of which will be in Germany. Bosch announced that it will cut 2 jobs worldwide in its automotive division and implement short-time work at its production facilities.
The Fragility of the German Economy and the Importance of the Automotive Sector
The German economy is particularly fragile due to persistent weakness in the manufacturing sector. The country's economy, which shrank by 0,3 percent in the second quarter of the year, managed to avoid a technical recession by growing by 0,2 percent in the third quarter. However, the crisis in the automotive industry is a combination of overlooked trends, structural problems and geopolitical risks. The automotive sector accounts for 5 percent of total value added and 3 percent of employment in Germany. This sector is also the largest industrial sector in terms of income.
Germany's Export Performance and the Future of the Automotive Industry
German automotive manufacturers exported €272,6 billion last year, representing 17,3 percent of total exports. It is estimated that the sector will employ around 2024 people by 773, excluding suppliers. However, employment in the automotive sector has decreased by 2023 percent compared to 0,8. Around 14 percent of workers in the industry are employed in the automotive sector, making it the second largest industrial sector after mechanical engineering, which employs 952 people.
