German Car Industry

A newly published policy paper of the European Network for Economic and Fiscal Policy Research headed by the ifo-Institute in Munich shows a rather negative image of industrial production in the German car industry which dropped by 9.4 Percent in the third quarter of 2018 which can be attributed to the problems with the implementation of the new Worldwide Harmonized Light-Duty Vehicles Test Procedure (WLTP).

The decrease in industrial production has significant economic consequences for Germany (-0.75% of GDP) but also its economic partners (Czech Republic (-0.21%), Hungary (-0.20%) and Slovakia (-0.18%)). Beyond, the car industry is highly interlocked with different domestic sectors such as metal production, rubber and plastic production or eletrical equipment which also faced severe economic losses. In the first half of 2019 the decline in German car production continued, mainly due to a weakening of worldwide demand. The paper concludes that the German industry is most likely expected to stay in recession for near future which affects the domestic economy as well as Germany's trading partners.

Further reading:

João Leal, Robert Lehmann, Bertrand Marc, Timo Wollmershäuser, Przemyslaw Wozniak, The Weakness of the German Car Industry and its Sectoral and Global Impacts, EconPol Policy Brief 18, September 2019.