The German car manufacturing is in crisis. Not only the media, but also research centers and think tanks close to the industry are reporting this. The orders have fallen to a record low for the last 2.5 years, according to data from the Institute for Economic Research at the University of Munich. Producers gently describe the demand as “extraordinarily modest”.
According to the German Association of the Automotive Industry (VDA), the number of orders fell by 8% between January and July this year. Interestingly, domestic demand fell by as much as 25% in the first half of the year. At the same time, the number of orders from abroad fell by only 5%.
In July, only 238,263 new cars were registered in Germany, which is 2.1% less than in the similar period last year. It was also noted that auto sales in July were 28% lower than in July 2019. In total, this year, almost 500,000 fewer new cars have been sold in Germany than in the same period in 2019.
Experts attribute this to the fact that from the start of 2023, the automotive industry has had to get out of the “order jam” that arose due to supply chain problems and semiconductor shortage. These factors led to delays in order fulfillment.
Meanwhile German car makers and suppliers feel more and more pessimistic about the future and less optimistic about the current market situation. Against the backdrop of the unstable global market situation, the automobile industry does not expect any improvement in the coming months. According to the Ifo Institute, the business climate index for the automotive industry fell to -18.3 points in July, down from -9.5 points in June. Factory load fell to 77.7%, nine percent points below the long-term average. Export expectations also fell significantly.
Moreover, even if there is an increase in production in the second half of this year, it still cannot be regarded as a sign of stabilization, experts believe. By July this year, 2.5 million cars had been produced, 11% less than in 2019, that is, prior to the coronavirus pandemic. Yet sales levels were down by one-fifth compared to 2019.
Experts also include rising energy prices, economic recession, extremely pessimistic business expectations and a general decline in household incomes among the factors that contributed to the drop in demand for German cars.
Against this backdrop, car production chains are gradually shifting from Germany to the United States and China, which have more favorable conditions for the industry. In fact, Germany has become a hostage of the deindustrialization policy pursued by its current authorities.
