The car industry is the backbone of the economy of Germany. According to new data that was released by the Federal Statistics Office, it suffered a significant decline in production in the second half of last year. The figures that were released today reveal that the production of cars and car parts dropped by 7.1 percent in the second half of last year as compared to the first half.
The production drop of the automotive industry dragged down the entire manufacturing sector of the country: Manufacturing production was down by 2 percent in the second half of the year. It was down by just 0.9 percent excluding the car industry.
Any type of downturn in the car production has a significant impact on a host of other businesses in Germany indirectly, from metal and iron manufacturers, to dealerships and leasing. The statistics office disclosed that the automotive industry employs approximately 880,000 people in the country directly, and around 1.75 million jobs are indirectly linked to the industry, which is equivalent to approximately 4 percent of the working population.
One of the main reasons for the decline in the production last year was the introduction of the new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) emissions-testing standards last September. Carmakers in Germany struggled to get their vehicles certified in time — Volkswagen issued complaints about a shortage of engineers — which resulted in massive production bottlenecks and loss of sales.
The carmakers did not have a great start to the current year either. The statistics office reported that car and car parts production was 4.3 percent lower in January as compared to that of December.
The overall manufacturing sector of Germany has had a gloomy start to the year as well. Tariff and trade disputes, a faltering global economy, and Brexit-related stress caused the manufacturing sector to drop to an 80-month low in March. The IHS Markit Purchasing Managers’ Index reading came in at 44.1 last March — the third month in a row that it came in under 50.0, which implies a contraction.