German Automotive Industry at Two-Year High
Business was better for German car manufacturers and their suppliers in April than the previous month. The indicator for the industry’s business situation rose to plus 21.6 points from plus 10.7 points in March. to reach its highest level since April 2019. “Carmakers have now overcome the slump they suffered due to the coronavirus,” says Klaus Wohlrabe, Head of Surveys at ifo. Automotive managers have raised their expectations as well: this indicator climbed to 24.9 points, up from 18.6 points in March.
“Car manufacturers are also pleased about a rise in demand,” Wohlrabe adds. Here, the indicator rose from 14.4 points in March to 36.9 points in April. Order backlog grew substantially, rising to 43.9 points following 17.5 points in March.
Accordingly, plans are to ramp up production further. After measuring 44.6 points in March, this indicator rose slightly to 47.1 points. Automakers are also expecting to see an increase in their export business. This indicator climbed to 30.9 points, up from 26.9 points in March.
In April, carmakers were also asked about their capacity utilization, which was up from 84.2 percent in January to 91.1 percent. Another question asked them to give reasons for production restrictions. In April 2021, only 13.7 percent gave a lack of orders as a response, compared with 59.8 percent in April 2020. At the moment, the main issue is problems with intermediate products, which were reported by 60.4 percent of the companies. That figure compares to only 5.8 percent in July 2020; back in April 2020, it was as high as 42.0 percent. Several automotive plants have now announced they will introduce short-time work due to the shortage in silicon chips.
Despite good business, companies are looking to employ fewer staff. Employment plans continue to provide for job losses. This reflects the structural change the industry is undergoing: the EU’s ambitious emissions targets are forcing companies in the sector to invest heavily in the production of electric vehicles, which, in the long term, is less labor-intensive. The stock of finished goods remained larger than usual for the season; this indicator dropped to minus 15.8 points, down from minus 10.6 in February.
