The German automotive industry has not been this bleak about its prospects since 2009 financial crisis, according to the latest survey from Munich-based Ifo Institute for Economic Research.
The Ifo barometer showed that export expectations plummeted to -42.7 points, from -17.3 in February, to their worst level since March 2009.
The index also showed that business expectations for the next few months dropped to -33.7 points in March after -19.7 points in February, while the demand index fell to -30.6 points, after -13.8 in February.
Automotive plants have been shuttered across Europe since mid-March, and that loss of production is reflected in the survey’s production expectations, which fell in March from 4.2 points to -35.9. It is not entirely clear when plants will be back online.
Over 41% of companies expect to put their employees on reduced hours, the IfO survey said. Germany car giants, including Volkswagen (VOW3.DE), Daimler (DAI.DE), and BMW (BMW.DE), announced in March that they would be applying for government approval to put tens of thousands of employees onto “Kurzarbeit,” meaning the government would pay up to 60% of workers’ salaries, while they are temporarily sent home, or work a much reduced schedule.
The coronavirus pandemic hit car sales in Germany hard. The German Ministry of Transport said on 3 April that car sales had declined by nearly 38% in March due to coronavirus from the same month in 2019.
IHS Markit’s most recent Purchasing Managers' Index for manufacturing showed that the export-dependent sector in Germany took a big hit in March, dropping to 45.4 points from 48.0 in February — the biggest drop in output for that heavyweight sector since the financial crisis in 2009.
Phil Smith, principal economist at IHS Markit said that there is “scope for the numbers to get even worse before they get better, as most containment measures and factory shutdowns happened either during or after the survey data was collected.”