ifo Institute: Business in the Automotive Industry Much Better Now
German carmakers and their suppliers assessed their business situation in October as noticeably better than in the previous month. However, they are somewhat more pessimistic about the future. This is the finding of the ifo Institute’s latest Business Survey. In October, the indicator for the current situation rose to minus 0.2 points, up from minus 20.4 points in September. It had bottomed out in April at minus 86.2 points. “Demand for cars has seen strong growth, which has greatly improved the mood among managers,” says Klaus Wohlrabe, Head of Surveys at ifo.
Capacity utilization in the industry rose considerably to 86 percent in October, after 73 percent in July. The number of newly registered cars produced by German manufacturers had already increased by 5 percent in September year over year. However, this increase is being driven by electric and hybrid cars, and German manufacturers do not yet have many of these on the market. Nevertheless, many indicators declined: for instance, the expectations index fell for the fourth consecutive month, from 27.6 points in September to 17.7 points in October. September’s exceptionally high order backlog could not be maintained, with the corresponding indicator sinking from 51.5 points to 29.2 points.
Companies are still planning to increase their production, but are somewhat more cautious than in September. Despite the good situation overall, automotive manufacturers are currently planning to reduce headcount.
International markets are likely to be somewhat less dynamic in the coming months (23.2 points, down from 31.3 points). Well over 70 percent (2019: 74.8 percent) of cars produced in Germany are exported. “While the main European customer countries – the UK, France, Italy, Spain – and the US are still firmly in the grip of the coronavirus pandemic, in China demand for German cars is once again climbing markedly,” says Oliver Falck, Director of the ifo Center for Industrial Organization and New Technologies. In 2019, China was the third most important export destination for German automotive manufacturers, after the UK and the US. Total exports of German cars in the first three quarters of 2020 fell by 34 percent year over year; the figure would have been even more dramatic if China had not propped up demand in recent months.
