BMW, Stellantis warn on surging costs as recession looms in Germany

BMW, Stellantis warn on surging costs as recession looms in Germany

Automotive News Europe — 2022-11-04

Automotive Industry

Stellantis has joined BMW in warning that Europe is struggling to cope with surging costs. As a result,  consumers in the region are starting to dial back car purchases.

The comments come as German factory orders continued to decline in September, adding to concerns that Europe’s largest economy is slipping into recession as it struggles with surging energy costs.

Demand fell 4% from the previous month, a steeper drop than the 0.5% median estimate in a Bloomberg poll of economists and accelerating from a revised 2% decrease in August.

The worse-than-expected decline was driven by foreign orders, which slumped by 7%, the Federal Statistics Office said in a statement on Friday 4 November 2022.

Demand from the euro zone area was 8% lower, compared with a 6.3% decrease from other countries. Domestic orders grew slightly.

“The outlook for manufacturing activity remains gloomy in light of high energy prices, which are increasingly affecting consumers,” the German Economy Ministry said in a statement.

“After the surprisingly positive development of gross domestic product in the third quarter, a weak Q4 looms.”

Manufacturing and industrial production also fell in France in September 2022, though the respective declines of 0.4% and 0.8% from the previous month were less than the 1.3% and 1% median estimates from economists.

Sapping demand

Factories in the whole region are struggling with record inflation that is sapping demand for their goods.

Surveys by S&P Global signaled this week that the euro area’s manufacturing sector is already in recession, with Germany among the worst-performing nations.

Companies in the country have had to reduce their reliance on Russian natural gas quickly after supplies were cut as President Vladimir Putin pursues his war in Ukraine.

While the likelihood of winter shortages has decreased thanks to a mild start to the heating season, a jump in prices is weighing on companies and households.

German orders for consumer goods still rose 7.2% in September 2022, but producers of capital goods used for manufacturing and providing services saw a 6% decline from October 2022, according to the statistics office.

More orders were completed than new ones received for the first time since May 2020, despite continued supply-chain tensions.