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BUSINESS

German investor confidence on the up

German investor sentiment rose slightly in June, on firming hopes for a gradual recovery in Europe's biggest economy in the second half of the year, the ZEW economic institute said on Tuesday.

German investor confidence on the up
Photo: DPA

Its closely watched index rose 2.1 points from May to 38.5. This was better than expected by analysts questioned by Dow Jones Newswires, who had forecast

an index of 38.1.

“The financial market experts are sticking to their assessment: The German economy is likely to gain momentum in the second half of 2013,” said ZEW president Clemens Fuest in a statement.

“The survey results indicate, however, that the economic recovery will proceed timidly. Almost half of respondents expect no significant economic impetus in the next half-year.”

For the survey, ZEW questions analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.

The German economy narrowly scraped past a recession in the year’s first quarter with 0.1 percent growth, after a contraction of 0.7 percent in the last quarter of 2012.

As much of the wider eurozone remains mired in recession, Germany’s central bank, the Bundesbank, has predicted 0.3 percent economic growth for Germany for 2013 as a whole, which is expected to pick up to 1.5 percent growth next year.

On Monday it said that, after a weak start to the year, marked by a bitterly cold winter that delayed construction, it expected a strong pickup for the second quarter.

However, this would likely be followed by slower growth in the summer, it predicted, citing weaker industrial orders and export data.

The ZEW survey confirms that the German economy “might have bottomed out in early 2013,” said Annalisa Piazza of Newedge Strategy.

“However, the pace of improvement remains extremely slow and — in our view — will force policy-makers to remain vigilant on the development on activity as downside risks continue to prevail.”

James Howat of Capital Economics also said the second straight rise in the index “reinforces other data in pointing to an acceleration in the German economy.”

However, he added that “the rise was down to improved expectations rather than any pick up in the current situation.”

The index, which polls 257 analysts and institutional investors on how they assess the economic situation at the moment, in fact fell slightly for the third month running, to 8.6 points from 8.9 points in May.

Berenberg senior economist Christian Schulz said the cautious optimism for the coming six months comes as “the key tail risk, the euro crisis, has faded from the headlines since the problems in Cyprus and Italy have been dealt with.”

However, he pointed out that the mood for now remains sombre, saying that “despite a string of solid recent hard data from industrial production, orders, retail sales and exports, investor’s assessment of the current situation remained subdued.”

AFP/kkf

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BUSINESS

Is Germany’s Volkswagen becoming ‘the new Tesla’ as it ramps up e-vehicle production?

When Volkswagen chief executive Herbert Diess joined Twitter in January, he used his first tweet to warn pioneering electric car maker Elon Musk that he was coming after him.

Is Germany's Volkswagen becoming 'the new Tesla' as it ramps up e-vehicle production?
ID.3 cars in the Zwickau, Saxony production plant in March. Photo: DPA

The bold proclamation raised some eyebrows, coming from a carmaker better known for its 2015 “dieselgate” emissions cheating scandal than its green credentials.

But all that has changed since the German group announced an offensive to dominate the electric car market globally by 2025, vowing to set up six battery factories in Europe by the end of the decade.

“Volkswagen is the new Tesla,” declared the Financial Times, referring to the now dominant Californian e-car group founded by billionaire maverick entrepreneur Musk in 2003.

“Our transformation will be fast, unprecedented and on a scale not seen in the automobile industry in a century,” Diess said at VW’s inaugural “Power Day” last Monday, where he fired off a flurry of announcements.

READ ALSO: Volkswagen to spend 60 billion to transition to electric cars

Industry watchers say it’s a credible bet. Bloomberg Intelligence auto analyst Tatsuo Yoshida said Volkswagen “has (the) potential to overtake Tesla’s number one position… in a few years”.

Karl Brauer, an analyst with CarExpert.com, said VW’s “combination of financial resources and manufacturing capacity make it a prime challenger for Tesla’s dominance” — even if catching up with its US rival is “not going to be easy”.

‘Saving face’

Diess, who has headed the 12-brand VW group since 2018, has never hidden his admiration for Musk, whose brash and unconventional ways have a habit of disrupting markets.

The two men have a friendly relationship and regularly exchange emails, according to an insider.

If the aim of Diess’s carefully choreographed “Power Day” was to capture some of the enthusiasm of a Battery Day Tesla held late last year, particularly in the United States, it appears to have worked.
Diess’s announcements saw US investors flock into Volkswagen shares, including many small traders using online platforms.

In just a week, the Wolfsburg-based car giant gained 15 percent on Frankfurt’s blue-chip stock exchange, giving the group a market capitalisation of more than 130 billion.

The rise puts Diess’s 200-billion-euro target within reach but he has a way to go before matching Tesla’s $619 billion valuation.

VW’s “forced transition” towards more environmentally friendly cars has now been “recognised by the market”, said Eric Kirstetter, an auto sector expert at the Roland Berger consulting firm.

VW ironically owes its change of course to the dieselgate scandal, which forced the group into “a face-saving dive into an all-in electro-mobility strategy”, said Germany-based industry analyst Matthias Schmidt.

The Volkswagen E-Golf in production in Saxony in March 2018. Photo: DPA

Industry watchers note especially its decision to focus on developing a single platform for all its brands which could well be the game changer for the German giant.

The platform was used for the first time on the ID.3 model which launched late last year. UBS analyst Patrick Hummel called it “the most significant bet on electric vehicles made by any legacy carmaker to date” as VW’s competitors are using mostly mixed platforms and a combination of technologies.

READ ALSO: Volkswagen to slash up to 5,000 jobs to fund electric vehicle drive

Not Apple but Samsung

VW’s move is aimed at achieving economies of scale for its 12 brands.

“Tesla is learning what is takes to move into high volume, whereas companies like Volkswagen already have volumes and it’s just a matter of switching volumes from one platform to another which they have done routinely in the past,” said Subodh Mhaisalkar, executive director of the Energy Research Institute at Singapore’s Nanyang Technological University.

But VW’s size also comes with its own disadvantages — consensus has to be found for each major decision not only with the powerful head of the workers’ committee but also with managements of the group’s various brands.

Beyond the core electric technology, Volkswagen is also playing catch up with Tesla on the just as important software.

Ben Kallo, an analyst at US investment bank Baird, believes Tesla will remain the market leader on electric cars because of its advances in battery cell production and autonomous driving.

“VW might not be the Apple but the Samsung of the electric vehicles world,”UBS said in a report.

On Twitter, Diess is still 49 million followers short of Musk.

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