A prisoner of the Middle Kingdom: the automobile, the leading German industry, now depends more on the decisions taken in Beijing than in Berlin. Production, supplies and outlets are suspended to control the epidemic and the reopening of factories in China.
China is first of all Germany’s leading supplier, with 109.7 billion euros in exports in 2019, 3.4% more than in 2018. The third destination too, after the United States and France, with 96 billion imports. But that’s not all: China is above all the leading producer of German cars.
China, the leading producer of German cars
The turning point was noted last year: “In 2019, for the first time, German automakers have produced more passenger cars in China than in their own country, “writes Deutsche Bank economist Eric Heymann in a note released on Monday. Their production in China reached 5.08 million vehicles in 2019, compared to 4.67 million on the national territory. However, sales plunged in February by 80% compared to last year, according to the Chinese association of manufacturers, CPCA.
The dependence is all the stronger as the requirements of China “oblige to ensure a certain degree of creation of local value”, recalls Eric Heymann. Worried about stock market developments, Audi, BMW or VW have therefore made reassuring statements about their Chinese productions, while agreeing that their delivery chains are “under observation”.
The supply of 52% of industrials in difficulty
The pessimistic observations nevertheless succeeded on Thursday. The supplies of more than 52% of the German industrialists are in difficulties, announces a poll diffused in the morning by the research institute Ifo.
The third German industry and avant-garde in the production chain, chemicals should record a 1.5% drop in production for 2020 on national sites, predicts its federation, VCI. A cold shower, after increasing results at the end of 2019.
The effects could be even more devastating taking into account the production of German chemists in China, recognizes VCI. For the moment, most of the German production is played in Europe, but the situation is changing. The world chemical leader BASF plans to concentrate 41% of its future investments in Asi e.
One after the other, German chemists are announcing an increase in charges linked to logistical and personnel problems linked to the virus: between 50 and 100 million for Lanxess, 60 million for Covestro, 30 million for Evonik.
Out of breath mechanics
After having suffered head-on from the structural changes in the automobile, mechanical engineering has little room to catch its breath. “Even assuming the situation calms down in the second half,” warned Carl Martin Welcker, president of the Federation of the Mechanical Industry (VDMA), “we will not be able to compensate for the additional declines in orders this year “
These new orders were already down 9% compared to 2018. With the effects of the pandemic on upstream supply and downstream orders, VDMA expects production to decline by 5% in 2020.
Continental boss Elmar Degenhart predicts losses “the size of the 2008 and 2009 crisis years”. The equipment supplier, already in the red in 2019, produces as close to its customers as possible in China, in South Korea or in the north of Italy.
Until the aid plan for the German economy announced for Friday , the automotive, mechanical and chemical industries call on the government to activate all the levers: layoffs, tax deferral, loss carryforward, etc.