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The slump in exports of Germany’s auto industry to China in the first quarter of 2023 could be the beginning of a new long-term trend of “strong disruption” in German-Chinese trade as China’s electric vehicle boom accelerates, a German economic research institute said on Tuesday.
German exports of motor vehicles and engines to China plunged by 26% year-on-year in the first quarter of 2023, researchers at the IW institute in Cologne wrote in a report published on Tuesday. Due to the high share of those goods in Germany’s exports to China – more than 20% in 2022 – the slump in car and engine exports accounted for nearly half of the total drop in German exports to China.
“There appear to be strong disruptions playing out in the automotive sector, especially regarding China’s increasing importance as an exporter of electric cars,” the report’s authors wrote.
According to the economic research institute, the latest quarterly Germany-China trade data reflect “major upheavals” in vehicle exports.
“If this development in vehicle construction – an economic sector that was very important for German export successes in the past – continues, the prospects for German exports to China are likely to continue to deteriorate,” the economists said.
Thus, once a German strength, the carmaking industry’s exports risk becoming a weakness for Europe’s largest economy, they added.
Germany has also increased its dependence on critical materials from China after the supply-chain issues caused by the pandemic. German imports from China are growing while exports – especially for Germany’s iconic automotive sector – are shrinking.
China, for its part, has numerous local and foreign EV makers competing in what is the world’s largest EV market.
China, Europe, and the United States continue to dominate EV sales, with China the frontrunner once again, accounting for around 60% of global electric car sales, the International Energy Agency (IEA) said in a report in April.
“More than half of the electric cars on roads worldwide are now in China and the country has already exceeded its 2025 target for new energy vehicle sales,” the IEA said.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com