The coronavirus pandemic has managed to turn off the main engine of the German economy - the car industry. Germany’s economically essential auto manufacturing industry, a powerful driving economic force, has been thumped hard by the coronavirus outbreak and stopped feeding the financial veins of the country.
In pre-coronavirus times, the local auto industry, which exceeded €45 billion, accounted for 6.6% of GDP. Economists warn that the industry is unlikely to recover to the pre-crisis indicators in the near future. Therefore, Europe’s strongest economy is sure to lose part of its export earnings. "We will certainly see a decline in this industry for a couple of reasons. Many car makers cannot use their full capacities because many international supply chains are disrupted or public health restrictions still apply to factories. Car dealers had to close for many weeks during the shutdown. And consumers fearing unemployment and income cuts delay purchases. This is a toxic mix for carmakers," Felix Roesel, an economist at Ifo institute, said. In addition, there is a sharp drop in demand all over the world for cars, including ones made in German automobile factories. According to a number of auto industry experts and some officials, the situation has worsened significantly and there is a real need for additional subsidies to automobile companies. However, German Chancellor Angela Merkel considers the current package of financial assistance sufficient to support all the pandemic-hit industries.
The European Commission expects the German economy to contract by 6.3% this year and advance by 5.3% next year. In the second quarter, the country's GDP fell by 10.1% compared to the previous one due to the coronavirus pandemic.
