German automakers’ expectations are at their worst since the 2008 financial crisis due to inflationary pressures, sclerotic economic growth in Europe and punishing competition from Tesla Inc. as well as Chinese carmakers.
The future view by the likes of Volkswagen, Mercedes-Benz, and BMW deteriorated for a fifth month in June to minus 56.9 points, a slump from minus 10.3 points the month before, according to a survey by the Munich-based Ifo Institute published on Wednesday. That’s not far off 2008’s low of minus 67.8.
The darkening expectations follow a surge in global interest rates and a growing number of corporate profit warnings, denting optimism of a soft economic landing. Some German industrials, notably chemical maker Lanxess AG, have cut or withdrawn outlooks in recent weeks because of softer demand, with more companies due to report financials and detail their view of the year in coming weeks.
Read more: Volkswagen Picks Insider to Lead Audi After Tesla Pulls Ahead
“Automakers are experiencing great uncertainty, comparable to the early days of the war in Ukraine,” said Oliver Falck, head of the Ifo Center for Industrial Organization and New Technologies. To compensate, carmakers plan to raise prices, particularly in for premium and electric vehicle models, he said.
Germany’s automotive industry is ramping up production of electric vehicles, but has struggled to keep pace with competitors. VW in particular has come under pressure in China, its biggest market by Tesla and local EV makers such as BYD Co., which outsold Volkswagen for the first time earlier this year.
While auto stocks have gained this year, with Europe’s biggest carmaker VW gaining 5.2%, their moves have been dwarfed by Tesla more than doubling in value.
The poor future outlook contrasts with carmakers’ appraisal of their current situation, which improved significantly since May to 37.5 points on the indicator from 28.4, Ifo said.
Read more: Tesla and BYD Set the Pace With Surge in Electric-Car Sales
(Updates with share price performance in sixth paragraph)