Decline in German automotive manufacturing weighs on the economic system – Metropolis A.M.

Structural change and a sharp decline in automotive production in Germany is weighing on the economy, according to a report published today.

The Munich-based ifo Institute estimated that the automotive industry workforce has shrunk by 1.3 per cent since the beginning of 2019, a much sharper decline than in the rest of the manufacturing industry (-0.2 per cent.)

Read More: Car production falls again amid ‘worrying times’ for UK automotive industry

“Structural change is leaving its mark on the labour market,” Timo Wollmerhaeuser, head of forecasts at the ifo said.

Despite a sharp drop in production, demand for German cars increased in 2019. Car makers expanded production of German brands outside Germany and then imported the cars.

“One possible reason for German automakers to relocate production like this is that they are increasingly converting their German sites to produce electric cars,” said Wollmerhaeuser.

Germany tries
to meet
the demand for hybrid and electric cars, the transition period could
passenger cars previously produced at German sites will
be built
in other European countries.

Car companies are adapting to keep up with these changes. Approximately 14 per cent reported the introduction of short-time work, almost double the average across other industry sectors.

Read More: Germany on track for growth as confidence rises, says Ifo institute

Short-time work is a temporary reduction in working hours intended to increase employee satisfaction. It is also a cost-saving strategy and what makes it particularly attractive is the availability of public funding.

The automotive industry accounts for five per cent of Germany’s total gross value added and for three percent of employees subject to social insurance contributions in Germany.

Main image credit: Getty Images

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