Roundup: EU Tariffs will Hurt German Car Industry amid Worsening Business Sentiment

BERLIN, 5 June (Xinhua), — According to a recent industry report, the business climate in Germany’s automotive industry has deteriorated in May. The corresponding indicator fell to minus 8,6 points, from minus 2.4 in April.

The ifo Institute for Economic Research reported Tuesday that German automakers and their suppliers have for the first time in October 2022 rated their current business conditions negatively. They “remain pessimistic for coming months.”

These companies had earlier rated their April business situation as better and had a less pessimistic view than in March.

According to data released by the German Association of the Automotive Industry (VDA) on Wednesday, domestic car production fell 18 percent from May of last year. In Europe’s biggest economy, the electric car market shrank disproportionately. Sales of new electric cars (EVs), in the first five month of 2024, fell by 7 percent compared to the previous year.

Ifo experts are concerned that the possible European Union tariffs on Chinese electric vehicles will have a negative impact on the automotive industry in China.

In October last year, the European Commission opened an investigation on anti-subsidy imports of EVs coming from China. The decision is still pending.

According to the Kiel Institute for the World Economy’s (IfW Kiel), last week, the possible EU tariffs against imports of Chinese electric vehicles would have a “noticeable effect on bilateral trade and European production”.

The Institute published simulation results showing that EV imports to China would fall by 25% with tariffs of 20%. German automakers who produce in China would be also affected.

IfW Kiel stated that the reduction in cars on the EU’s market could only be compensated by exporting cars or increasing production. The higher costs of production in the EU due to the higher energy, materials and labor costs, compared to China, would result in higher prices for consumers. This was the conclusion of Julian Hinz, a specialist at the Institute.

IfW Kiel also added that countermeasures from China were not included in the simulations.

Dirk Jandura, president of the Federation of German Wholesales, Foreign Trade and Services, echoed the results of the simulation study and said that, in the end, market participants, companies and consumers would be the losers of tariffs.

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