In September 2018, the introduction of the then new WLTP exhaust gas treatment system left companies in the German automotive industry with the good annual result they had achieved until then. Overall, the production of cars and car parts fell by 1.7% in 2018. At that time, however, there was still hope that the lost demand would be made up over time. This was also true to some extent for registrations, which rose by 2.5% between January and September. However, the price-adjusted production of automobile manufacturers and suppliers fell by 11% in the first eight months compared to the same period of the previous year.
This means that hopes of a renewed rise in industrial production in Germany have not been fulfilled for the time being. If the automotive industry shrinks and capacity utilization falls towards its long-term average, companies in the automotive industry will also place fewer orders with machine builders. Accordingly, the outlook for the two largest manufacturing segments remains subdued. These two segments account for almost one third of the value added of manufacturing industry as a whole. With more than 800,000 employees, the automotive industry alone is responsible for more than 5% of the value added of all economic sectors and thus represents an important pillar of the German economy.
What is particularly serious about the current situation is that the weakness of the automotive sector now has a number of reasons. The direct and indirect effects of the trade dispute between the United States and China, the resulting cooling of the global economy and the continuing uncertainty surrounding Brexit play a major role alongside industry-specific causes such as the fear of diesel bans and comparatively high prices for hybrid and electric vehicles. In addition, the German automotive industry is dependent on solid foreign demand. The sector generates almost two thirds of its total sales outside Germany. And a considerable proportion of this is generated in the UK.
Due to the enormous challenges facing the industry, we do not yet expect growth for 2020 after a significant decline in production and sales this year, at least in terms of production. However, 2020 should not be as weak as it is this year if there are no US punitive tariffs on cars and car parts from the EU.