German auto industry confidence plunges in May amid Middle East tensions, US tariff threats

Business confidence in Germany’s automotive sector fell sharply in May as Middle East tensions and renewed US tariff threats weighed on outlooks, according to data from the Ifo Institute.

The Ifo business climate index for the sector dropped 4.8 points to minus 23.8 in May, down from minus 19 in April, the Munich-based economic research institute said.

While firms’ assessments of current conditions showed limited improvement, expectations for the coming months deteriorated markedly. The business expectations index fell to minus 30.7 from minus 15.3 in April.

Ifo said signs of shortages in raw materials and intermediate goods are becoming more visible across the sector.

The share of companies reporting shortages of key intermediate products rose to 9.3% in April from 1% in March.

Helium gas, used in critical applications such as chip production, airbags, metal processing and battery leak testing, is at the center of supply concerns.

According to the German Mineral Resources Agency, the EU sources around 40% of its helium imports from Qatar, while alternative supply routes remain limited in the event of disruption.

Uncertainty linked to the Iran-centered crisis is also weighing on both corporate and consumer sentiment.

Ifo warned that rising insecurity and energy costs could further dampen demand for new vehicles.

Commenting on the data, Anita Wolfl, an expert at Ifo’s Center for Industrial Organization and New Technologies, said the Iran crisis is adding pressure to an already strained sector facing weak demand and supply bottlenecks.

She said helium remains difficult to substitute in key industrial processes, making any disruption a significant risk for manufacturers and suppliers.

The sector is also under pressure from the US after President Donald Trump said tariffs on EU vehicle imports would be raised this week to 25% from 15%.

Hildegard Muller, president of the German Association of the Automotive Industry (VDA), said the higher duties would impose significant costs on European automakers already operating in a difficult environment, and would ultimately raise prices for US consumers.