German automaker mood darkens on slowing EV shift, China slump

Germany's automakers are growing gloomier about their prospects after a disappointing earnings season marked by waning electric vehicle sales and weakness in China for companies including Volkswagen Group and Mercedes-Benz.

Business expectations by the German auto industry deteriorated to minus 18.3 points in July, from minus 9.5 points the month before, according to a survey by the Munich-based research institute Ifo Institute published on Monday. Several manufacturers have reported poor financial results in the past weeks.

The German auto industry is struggling with waning demand for EVs after spending billions to ramp up the technology. It's also under pressure in China, where sales are slowing due to a deepening home sales crisis.

Mercedes trimmed the upper range of its annual margin forecast last month, while Volkswagen is pledging deeper cost cuts to counter the slump.

"The auto industry is sliding further into crisis," Ifo's Anita Wölfl said in a statement. "A significant improvement is probably not to be expected in the next few months."

The industry's capacity utilization has fallen to around 78 percent, Ifo said, nine percentage points below the long-term average, as automakers including VW reduce output at high—cost factories. Over 43 percent of respondents complained about a lack of orders, up from 29 percent in April.

Sentiment in Europe's biggest economy, according to a gauge compiled by the European Commission, is now just shy of the level it was at in February 2022, when a slump took hold after Russia's invasion of Ukraine.