Sentiment in the German Automotive Industry Deteriorates Rapidly

The Business Climate Index for the German automotive industry fell in November to -32.1 points, down from -28.6 points* in October. “The industry is stuck in the current mix of far-reaching transformation, intense competition and a weak economy,” says ifo industry expert Anita Wölfl. 

Companies are once again assessing their current business situation as significantly worse than in October and are even more pessimistic about the next six months: The business situation indicator fell to -33.9 points, compared to -29.0 points* in the previous month. The indicator for business expectations fell to -30.4 points, following -28.2* in October.

The gloomy mood is mainly due to weak demand: “The mountain of orders that companies in the automotive industry had accumulated since the beginning of 2021 in the face of the pandemic and supply chain problems has been processed. New orders are coming in, but are not enough to ensure full utilization of capacities,” says Wölfl.

The crisis in the automotive industry is also reflected in demand for labor: Although the indicator for employment expectations has risen slightly compared to the previous month, it has fallen to a long-term low of -34.1 points. “Many companies in the automotive industry are cautious about when it comes to new hires or are discussing job cuts,” says Wölfl.

The companies surveyed were also pessimistic about foreign business in the months ahead. However, a negative Trump effect does not appear to have materialized. The indicator for export expectations fell from -31.3 points* in October to -19.2 points in November. “Companies are still waiting to see how trade policy will develop,” says Wölfl. In addition, the dollar has appreciated strongly since the election, which may benefit exporters.

* Seasonally adjusted