The business climate index of the German automotive sector, which was -30.7 points in April, decreased by 1.1 points to -31.8 points in May. The current situation index, on the other hand, recovered slightly to -35.3 points in May. However, the sector's business expectations for the coming months showed a more pessimistic outlook, decreasing from -25.2 points to -28.3 points.
“US President Donald Trump's volatile tariff policy continues to have a significant impact on the export prospects of the automotive industry,” Ifo noted in a statement. The statement also emphasized that companies evaluated the current business situation slightly more positively compared to the previous month, but were more pessimistic about the coming months.
“The confusion about US tariffs is causing problems for the automotive industry in Germany,” commented Anita Wölfl, expert at the Ifo Center for Industrial Organization and New Technologies.
Trump threatens EU with 50% tariffs
On May 23, Trump announced on Truth Social that the trade negotiations with the European Union (EU) were inconclusive and that he proposed a 50% direct tariff on the EU as of June 1. Following these statements, Trump had a phone call with EU Commission President Ursula von der Leyen and postponed the planned tariff implementation to July 9, 2025. The EU side also announced that it would speed up negotiations.
Negotiations on exemption in exchange for investment
According to reports in the German press, major German automakers such as BMW, Volkswagen and Mercedes-Benz are in talks with the US Department of Commerce about a possible customs exemption. The companies are allegedly offering billions of dollars of investment in the US in exchange for exemption.
The sector carries a large economic weight
The German automotive sector is among the locomotives of the country's industry. The sector, which accounts for 5% of the total added value in Germany, provides 3% of the employment. Approximately 14% of industrial employees are in this sector, and it ranks second in terms of labor force after the mechanical engineering sector with 952 thousand employees.
As of June 2024, approximately 773 thousand people were employed in the sector, excluding suppliers. This figure indicates a decrease of 0.8% compared to 2023. On the other hand, German automotive manufacturers exported a total of EUR 272.6 billion worth of goods in 2023, accounting for 17.3% of the country's total exports.
Developments in the German automotive sector are closely monitored both in terms of production balances within Europe and the future of global trade.
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