Climate in auto sector slumps ahead of crunch German’s Merkel meeting

FILE PHOTO: A worker wears a protective mask at the Volkswagen assembly line after VW re-starts Europe's largest car factory after coronavirus shutdown in Wolfsburg, Germany, April 27, 2020, as the spread of the coronavirus disease (COVID-19) continues.

The business climate in Germany’s auto sector suffered its biggest slump and hit its lowest level in April since 1991, when the Ifo economic institute began collecting data post-reunification, a survey showed on Monday.

The news came ahead of a conference call that Chancellor Angela Merkel will hold with representatives of the German auto industry on Tuesday to discuss the impact of the coronavirus pandemic on production and sales.

Ifo said its survey of 75 auto firms showed a current business index for the sector fell to -85.4 points in April from -13.2 in March. The April reading fell below a reading of -82.9 points registered in April 2009, during the financial crisis.

“We have never seen such bad figures for this key sector,” said Klaus Wohlrabe, head of forecasting at Ifo.

Sub indices on orders, and production expectations and export prospects all fell, with capacity utilisation down to 45%.

Ahead of Tuesday’s meeting with Merkel, Volkswagen (VOWG_p.DE) and Daimler (DAIGn.DE) have urged the government to help boost demand for cars.

The pandemic hammered first-quarter profits and forced both carmakers to drop their outlooks for the year.

Car sales across the world have slumped as measures to contain the pandemic forced production lines to shut and showrooms to close, starving manufacturers of much needed cash for investments.

Volkswagen restarted production at its Wolfsburg factory in Germany last week, the latest of a fleet of European carmakers to take advantage of eased coronavirus lockdown rules to resume manufacturing.

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