The Ifo Institute reported that the business climate in the automotive industry deteriorated in April. The indicator dropped to -23.8 points, a decline from -19.0 points recorded in March. While companies assessed their current business situation better than in the previous month, they are looking significantly more pessimistic about the coming months.
Business expectations dropped further to -30.7 points, compared to -15.3 points in March. According to Ifo industry expert Anita Wölfl, “The Iran crisis is placing additional strain on and exacerbating the already weakened auto industry”.
Manufacturing in the sector is also showing initial signs of material scarcity. In April, 9.3% of companies reported a shortage of essential raw materials, a substantial increase from nearly 1% in March. Wölfl explained that the Iran crisis specifically affects the production and supply of helium, a noble gas crucial for multiple stages of automotive manufacturing, both directly and indirectly. Helium is used, for instance, in chip production, airbags, metal processing, and battery leak detection. The German Raw Materials Agency noted that the EU sources a significant portion of its helium needs (about 40%) from Qatar, and alternative import sources are scarce.
Furthermore, the broader indirect effects stemming from the Iran crisis are contributing to the slump in business expectations. General uncertainty among both businesses and households is increasing. Combined with elevated energy prices, this heightened instability is expected to lead to reluctance among consumers to purchase new vehicles.
