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Global Economy

More headwind for car manufacturers

Delivery bottlenecks and high inflation continue to make things difficult for car manufacturers. According to the Federal Motor Transport Authority (KBA) in Flensburg, 205,900 new vehicles hit the roads in July, 12.9 percent fewer than a year earlier.

New registrations had already shrunk in the past few months. Since the beginning of the year, this has resulted in a drop in sales of a good eleven percent to around 1.4 million vehicles. Among the German brands, only the sports car manufacturer Porsche, which belongs to Volkswagen, recorded an increase in sales in July. Among the imported brands, Tesla achieved the highest percentage growth.

BMW expects sales to decline

After an increase in sales in the second quarter, the car manufacturer BMW is preparing for a headwind. The people of Munich are becoming more cautious about their sales targets. For the current year, car sales are now expected to be "slightly below" the previous year's level of 2.5 million cars, as the DAX company announced today. At BMW, that means a drop of between one and five percent. So far, CEO Oliver Zipse had aimed for the previous year's level.

The BMW share is then passed down in Frankfurt trading. With a minus of more than five percent, it is one of the biggest losers in the DAX. Since the beginning of the year, it has already lost around 16 percent of its value, roughly as much as the leading German index.

BMW: high inflation and interest rates depress demand

BMW referred to the difficult environment with supply bottlenecks as the reason for the downwardly adjusted forecast. Business conditions are likely to remain difficult in the second half of the year.

"Inflation and interest rate increases, which will continue to shape the macroeconomic environment in the coming months, are having an impact on demand. Accordingly, the above-average high order backlog – especially in Europe – can be expected to normalize towards the end of the year."

ifo: Gas Crisis and China Dampen Business Expectations

The Munich ifo Institute also paints a bleak picture for the automotive industry: the business situation of German car manufacturers deteriorated at the beginning of the second half of the year. The corresponding barometer fell in July by 1.9 to 20.5 points, as the institute announced today in its monthly company survey.

Manufacturers' price expectations fell from 73.1 points in June to 38.6 points in July. "The possibilities for car manufacturers to pass on rising material costs to consumers seem to have reached a limit," said Oliver Falck, head of the Ifo Center for Industrial Organization and New Technologies.

At the same time, the order backlog of car manufacturers has decreased. The manufacturers have also scaled back their production. "Concerns about a possible gas shortage and the continued pandemic-weakened Chinese economy as an important foreign market are affecting the future business of car manufacturers," said Falck. The decline in business expectations was correspondingly clear, from plus 10.1 points to minus 6.5 in July.

PwC: Production bottlenecks are slowing down e-car sales

According to the management consultancy PwC, production bottlenecks, supply chain problems and lockdowns in China have meanwhile also slowed down sales of battery electric vehicles (BEV) worldwide. New registrations of e-cars in 14 selected markets increased by 108 percent in the first quarter compared to the previous year, and by only 62 percent in the second quarter. "Only just under 1.5 million BEVs will be produced in Europe this year – with maximum capacity and without bottlenecks, it could be more than twice as many," said PwC industry expert Felix Kuhnert.

"Electromobility is bracing itself against a stumbling overall market," said Kuhnert. German car manufacturers were particularly badly affected by supply bottlenecks as an economic consequence of the war in Ukraine. The choice of models was limited, the delivery times were long. In the world market, the BEV market share of German manufacturers fell from 14 to eleven percent.

However, the industry experts are now seeing "first signs of an easing of the supply bottlenecks" and expect more production capacities for electric cars with stronger growth in the second half of the year. In Germany, they expect a constant increase in demand, which should not be severely slowed down by the cut in state subsidies.

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