A group representing Germany’s machinery industry yesterday said that it expects production to drop 17 percent this year as the sector struggles with the fallout from the COVID-19 pandemic and international trade tensions.
Orders for machinery, a major German export, were down 16 percent in the first seven months of the year compared with a year earlier, while production declined 14 percent, the Mechanical Engineering Industry Association said.
The association cited the effects of the pandemic, protectionism in international trade and change affecting the auto industry — a key customer.
Official data released yesterday showed that Germany’s overall exports were up 4.7 percent in July compared with the previous month.
That was the third consecutive month-on-month gain following huge declines at the height of Europe’s COVID-19 lockdowns — but a much smaller increase than the 14.9 percent seen in June. In year-on-year terms, exports fell 11 percent.
That is in line with recent data showing that increases in German factory orders and industrial production also slowed in July.
The government last week said that the economy was performing better than expected following the easing of Germany’s lockdown restrictions, which were less drastic than in some other European countries.
It is now predicting that the economy would contract 5.8 percent this year, a somewhat more optimistic outlook than the 6.3 percent it forecast in late April.
Germany’s struggling auto industry needs more government aid, including a purchasing bonus for less-polluting combustion-engine vehicles, to help weather the pandemic, German Minister for Transport, Building and Urban Development Andreas Scheuer said.
The number of electric vehicles available is limited and there are combustion-engine models on the market that are relatively clean in terms of air pollution, Scheuer said in an interview with DLF radio yesterday.
“We are talking about a key German technology and many, many jobs and families depend on it,” Scheuer said, ahead of talks later yesterday chaired by German Chancellor Angela Merkel between government officials, regional leaders and auto executives on the future of the industry.
Merkel’s ruling coalition is divided over the need for a purchasing incentive for combustion vehicles, with Scheuer’s party — the Bavaria-based Christian Social Union — arguing in favor and others insisting that the focus should be on promoting electric vehicles.
Merkel last week said that she was aware of the CSU’s position, but saw no need to expand the government’s stimulus package for the time being.
Germany has already sought to lift auto sales by introducing purchasing subsidies of as much as 9,000 euros (US$10,632) per electric vehicle.
Scheuer, who was to attend yesterday’s “car summit,” said that more government support was needed to help automakers and parts suppliers cope with the fallout from the pandemic.
Additional reporting by Bloomberg
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