The institute said in a report from its headquarters in Munich, southern Germany, that its vital sector index fell by 6.2 points in August to minus 24.7 points, compared to the previous July, which prompted the institute to comment that the car manufacturing sector was experiencing a “free fall.”
The Ifo report took a negative view of the next six months, saying that German carmakers “are suffering from a decline in orders, especially from outside Germany, which also affects human resources planning.”
The institute’s report coincided with the Federal Office for Road Traffic and Vehicles submitting a “pes
simistic report” that also said that demand for electric cars produced in Germany declined by 69 percent last August compared to the same month last year.
He added that the decline rate for diesel-powered cars decreased by 24.4 percent during the same period, while the decline rate for gasoline-powered cars reached 7.4 percent.
The decline in demand for electric cars is attributed to the German government’s cancellation of government support for this type of car at the end of last year, which the Berlin government justified with an austerity plan in the budget, noting that it recently announced that it intends to resume providing support to citizens wishing to purchase electric cars.
Volkswagen reneged on its promise
Volkswagen Group is at the forefront of the crisis, especially after announcing a few days ago that it had reneged on its promise not to lay off workers and does not rule out closing its factories in Germany.
Germany’s Volkswagen said the challenges facing the car industry meant it could not rule out closing factories in its home country – and abandoning a long-standing job protection pledge made in 1994 that would prevent layoffs until 2029.
“The European automotive industry is in a very difficult and dangerous situation,” Volkswagen Group CEO Oliver Blume said in a statement at the start of the week.
He cited new competitors entering European markets and Germany’s deteriorating position as a manufacturing location, stressing the need to “act decisively.”
Volkswagen’s passenger car chief executive Thomas Schaefer said cost-cutting efforts had “yielded results” but that “the challenges are becoming increasingly severe”.
European carmakers are facing increasing competition from much cheaper Chinese electric cars, and the company said its half-year figures suggest it will miss its target of 10 billion euros in cost savings by 2026.
The discussion about closures and layoffs concerns the company’s core brand Volkswagen. Operating profit for the core brand fell to 966 million euros ($1.1 billion) from 1.64 billion euros in the same period last year. The group also includes the luxury brands Audi and Porsche, which have higher profit margins than the vehicles Volkswagen makes in the overall market, as well as Seat and Skoda.
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