IFO: German car industry pessimistic about demand

According to a survey of IFO, the German car industry fears a slowing domestic demand. The body, questioning both suppliers and manufacturers, says that these dimmed expectations are attributed to a cautious attitude from car buyers.

In its monthly indicator, the  Leibniz Institut für Wirtschaftsforschung (IFO) registers a changing business situation for the German automotive sector, reporting a decline from 12,5 points in January to 6,0 points last month. The body concludes that the situation is worsening for carmakers.

Uncertainty about charging

The director of the organization, Oliver Falck, comments: “While manufacturers are still currently working through existing orders, demand from potential buyers is faltering.” Falck points to the uncertainty concerning charging as one of the potential reasons. “There’s an uncertain development of electricity prices and talk of rationing power for recharging batteries.” However, EV registrations only account for roughly 15% of the German market.

As the IFO barometer probes both suppliers and manufacturers, it is clearly the latter who show less optimism. Among carmakers, the quotation fell from 21,4 to 2,8. They point to export as a stronghold.

No dark clouds for Volkswagen

Zooming out, the situation might be less cumbersome than the indicator foretells. When Volkswagen posted its 2022 results last week, it presented an outlook of solid recovery for this year.

Germany’s most significant car group said it would deliver 9,5 million cars in 2023, a hike of 14% compared to 2022. The group attributed the optimistic scenario to signs of an easing supply chain bottleneck and a resurgence from the chip crisis.

On the other hand, Mercedes expects lower earnings from 2023, with sales stagnating. BMW predicts a slight rise in output, with the target of 10% BEVs in place.

In the IFO survey, suppliers disagree with the probed manufacturers and assess their situation more positively than in the previous month. However, fewer companies intend to increase their production in this subsector than in the previous month.