Mercedes crisis amplifies German industrial woes

Germany’s industrial crisis deepened yesterday after Mercedes-Benz cut its profit forecast for the whole of Germany for the second time in less than two months.

The company has suffered from falling demand for cars due to the economic downturn in China.

After cutting its profit outlook in July, the company did so for the second time yesterday, sending shares down 6.8 percent in Frankfurt. The car giant’s full-year profit is expected to be “significantly lower” than the £17 billion it reported last year.

Chief executive Ola Kaellenius said there was “a huge amount of caution” for the company. He added: “How long will that last? I don’t know, but I remain cautious for the foreseeable future on China.”

Analysts at Stifel said the cut in expectations was “not a big surprise” but the size of it was a “negative surprise.”

Mercedes is not alone in turmoil. BMW was also forced to lower its outlook earlier this month, driven by subdued demand in China.

Volkswagen said it could close factories in the country for the first time in its 87-year history.

There are concerns the move could lead to the loss of 30,000 jobs. Germany, the continent’s largest economy and once an industrial powerhouse, is suffering a prolonged recession in manufacturing, earning it the nickname “the sick man of Europe.”

That’s partly because China is encroaching on its turf and directly attacking the auto industry.

Figures from this month show that manufacturing activity in Germany is falling at its fastest pace in five months.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said the downturn in German industry was “lasting much longer than anyone expected”.

The automotive industry is also being hit by the drop in demand for electric vehicles.

Figures from the European Automobile Manufacturers’ Association (ACEA) showed that just 92,627 battery-only cars were registered in the European Union last month, down 44 percent from August last year.

According to ACEA, the decline was “driven by a dramatic drop” of 69 percent in Germany and 33 percent in France, the two largest markets for battery electric vehicles in the region.

“The electric car market is currently in an increasingly downward trend,” a spokesperson said.