German car sales slump while exports surge

German car sales plunged last month, reflecting an end to a cash-for-clunkers bonus, but robust foreign demand for Germany's famed luxury models sparked a spurt in exports.

German car sales slump while exports surge
Photo: DPA

Matthias Wissman, head of the VDA auto association, said the federation foresaw a “normalisation” in the auto industry this year in the aftermath of car-scrapping premiums in many parts of the world. He also pointed to solid performance expected on Asian markets.

In Germany, car sales fell by 32 percent in June to 289,400 vehicles, compared with June 2009 when the scrapping bonus was in effect. In Germany the bonus offer expired in September 2009.

But exports surged by 26 percent last month to 395,000 vehicles, with overall production rising 10 percent, according to the VDA. “Foreign trade is undoubtedly the industrial engine at the moment,” Wissmann said.

“We are seeing international markets pick up much more rapidly than many had expected. The drivers of growth are above all Asian markets,” he added.

Wissmann nonetheless sought to put foreign sales in perspective, recalling that German exports had been particularly weak in mid 2009.

“The current year will be one of normalisation” for auto makers following a surge in 2009 sales thanks to car-scrapping schemes in many parts of the world, he said.

Although car sales have slumped in many European markets, foreign demand has picked up sharply and German auto manufacturers like BMW and Daimler are ramping up production in Germany and the United States.

A spokesman for BMW said the company was in talks with unions to add night shifts and to cut back on summer holidays.

Wissmann said several factors explained the brighter outlook, noting that “German manufacturers have very strong brands” and have steadily increased investments in research and development.

“Exceptionally constructive cooperation” with trade unions also helped car makers make it through the global economic crisis, along with shorter working hours that were partially subsidised by the state, he added.

German new car registrations for 2010 were forecast to fall by about 25 percent to 2.8-2.9 million vehicles, owing to the end in September 2009 of state subsidies for the scrapping of old cars, it added.

Overall output should expand by 10 percent however, and Wissmann noted that “six months ago, no one would have hoped for such a dynamic progression.”

Elsewhere in Europe, French car sales dipped by 1.2 percent in June, with foreign brands faring better than domestic rivals.

The French data was published just as a scrapping bonus launched to help that country’s sector through the 2009 economic downturn was cut back further.

But Spanish car sales surged 25.6 percent as consumers brought forward purchases ahead of a rise in VAT sales tax of two percentage points on Thursday. That date also marked the end of Spanish cash-for-clunkers subsidies.

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German steelworkers agree 6.5 percent pay hike after strike

Tens of thousands of steel workers in western Germany will get a 6.5-percent pay hike this year - the biggest jump in three decades - in a settlement that could set the tone for industry as inflation soars.

German steelworkers agree 6.5 percent pay hike after strike

The agreed increase would come into effect “from August 1st”, the IG Metall union in the region of North Rhine-Westphalia said in a statement Wednesday.

The 68,000 steelworkers in the industrial region would also receive a one-off payment of 500 euros for the months of June and July, the union said.

The outcome of the negotiations was “the biggest increase in wages in the steel industry in percentage terms in 30 years,” said IG Metall boss, Joerg Hofmann.

Germany’s largest union, IG Metall launched a strike action at steelworks in the west in May after management failed to meet its demands for an 8.2 percent pay increase.

On Thursday at the peak of the movement, around 16,000 workers across 50 firms downed tools, the union said.

READ ALSO: Should foreign workers join a German union?

“Rising inflation” and the “good economic situation” of the steel industry were the basis for IG Metall’s demands.

Consumer prices rose at a 7.9-percent rate in Germany in May, a record for the country since reunification in 1990 driven by the outbreak of the war in Ukraine.

The smaller number of steelworkers in the east of Germany, who are also seeking an 8.2 percent pay boost, have yet to reach their own agreement.

Negotiations are currently taking place in a number of sectors. In the textile industry, 12,000 workers in the east of Germany sealed a 5.6 percent pay increase at the beginning of May.

Meanwhile, negotiations covering the auto industry, and mechanical and electrical engineering will begin in November.

Despite the agreed rise the onus was still on government to relieve the pressure on workers form rising prices “in the coming months”, IG Metall boss Hofmann said.

Significant wage demands have prompted concerns of a wage-price spiral, where rising pay sustains higher inflation.

The European Central Bank last week said it would raise its interest rates for the first time in over a decade this July as it seeks to stamp out price rises.