The business atmosphere within the automotive sector is less favorable.
The automotive industry in Germany experienced a sharp decline in business conditions during May. The relevant index took a major hit, reaching a record low of -8.6 points, following a -2.4 point drop in April, as per the Munich Ifo Institute. The main cause of this downturn, according to experts, is the uncertainty surrounding the trade dispute between China, the US, and Europe over electric vehicles.
The current China-US-Europe trade squabble is expected to have severe implications on German car manufacturers. The new negative indicators reflect a shift in the business climate, which hadn't previously been seen since October 2022. Cost-saving measures are being considered by the companies, including reducing the number of employees. The Ifo reported an effiency score of -20.2 points, down from -14.7 points observed in April.
Recently, the US implemented steep tariff hikes on Chinese-made vehicles and parts, as part of an effort to support its homegrown production. The European Union is currently investigating Chinese subsidization of its own car manufacturers, potentially prompting similar tariffs. China has voiced its willingness to retaliate against these actions.
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The trade conflict between China, the US, and Europe, particularly over electric vehicles, is negatively affecting the business climate in the car industry. As a result, German car manufacturers are considering cost-saving measures, such as reducing the number of employees, due to the expected severe implications of this dispute.
