Expectations among German carmakers plummet further in April

Sentiment in the German car industry deteriorated further in April, according to figures published on Monday, with new tariffs on cars and auto parts announced by US President Donald Trump expected to put another damper on expectations.

The business climate index of the ifo Institute dropped to -23.8 points last month from -19.0 in March, the Munich-based economic think tank said.

"Although companies assessed their current business situation as better than in the previous month, they are considerably more pessimistic about the coming months," the institute said.

Its business expectations index plummeted to -30.7 points in April from -15.3 points in March.

Germany's car industry, once considered the backbone of the economy, has long been struggling with an array of challenges, including growing competition from China and a slow transition to electric vehicles.

New US tariffs have also been weighing on the sector, with Trump aiming to get foreign businesses to produce in the country.

In another blow to German carmakers, Trump said on Friday he will raise tariffs on cars and trucks imported from the European Union to 25% starting this week, accusing the bloc of failing to comply with a trade agreement and escalating a long-running trans-Atlantic trade dispute.

Under the trade deal agreed in August, tariffs on cars and auto parts were capped at 15%. 

However, implementation in the EU has slowed amid renewed tariff threats by Trump and legal uncertainty following a US Supreme Court ruling in February that found many of his existing tariffs unlawful.

Meanwhile, the war in Iran is also adding to the woes of German manufacturers, "placing an additional strain on the already weakened automotive industry," ifo industry expert Anita Wölfl said.

More and more companies are suffering from material shortages due to the war launched by the US and Israel, with 9.3% lacking "key intermediate products" in April, compared to just under 1% in March.

The war in Iran, and the closure of the Strait of Hormuz, are having an impact on the production and supply of helium, Wölfl said.

In the automotive sector, the gas is used for chip production, airbags, in metalwork, and to detect leaks in batteries.

According to ifo, the EU sources some 40% of its helium needs from Qatar.

Besides a direct impact on supply chains, the war also has indirect effects for German carmakers, which are reflected in the poor outlook, including growing uncertainty among businesses and consumers.

"Combined with the high energy prices, this could lead to a reluctance to buy new cars," ifo said.