German Auto Sector Confidence Plummets as Tariffs, Iran Crisis Bite

(MENAFN) Business sentiment across Germany's automotive industry deteriorated sharply in May, hammered by deepening Middle East instability and a renewed wave of US tariff threats, fresh data from the Ifo Institute revealed.

The Ifo business climate index for the sector plummeted 4.8 points to minus 23.8 in May, retreating from minus 19 recorded in April, the Munich-based economic research institute reported.

Although firms' appraisals of present operating conditions registered a modest uptick, forward-looking expectations weakened considerably. The business expectations index slid to minus 30.7 from minus 15.3 in April — a deterioration that signals deepening anxiety across the industry.

Ifo flagged growing evidence of tightening supplies of raw materials and intermediate goods throughout the sector. The proportion of companies flagging shortages of critical input products surged to 9.3% in April, a dramatic jump from just 1% in March.

At the heart of those supply anxieties is helium gas — a resource indispensable to applications ranging from semiconductor manufacturing and airbag production to metal processing and battery leak detection. According to the German Mineral Resources Agency, the EU sources approximately 40% of its helium imports from Qatar, leaving the bloc acutely exposed given the scarcity of viable alternative supply routes should disruptions materialize.

Broader uncertainty stemming from the Iran-centered regional crisis is also corroding both corporate and consumer confidence. Ifo cautioned that a combination of mounting insecurity and surging energy costs threatens to further suppress appetite for new vehicle purchases.

Anita Wolfl, an expert at Ifo's Center for Industrial Organization and New Technologies, offered a stark assessment of the sector's predicament, noting that the Iran crisis is piling pressure onto an industry already grappling with sluggish demand and entrenched supply bottlenecks. She underscored that helium cannot be readily substituted in key industrial processes, meaning any sustained supply disruption poses a severe risk to manufacturers and their supplier networks.

Compounding the sector's woes, US President Donald Trump announced plans to raise tariffs on EU vehicle imports to 25% from the current 15% level — a move that drew a sharp response from Hildegard Müller, president of the German Association of the Automotive Industry (VDA), who warned that the steeper duties would impose considerable financial burdens on European automakers already navigating a punishing operating environment, while ultimately driving up vehicle prices for American consumers.

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