BERLIN, June 5 (Xinhua) — The business climate in Germany’s automotive industry took a turn for the worse in May, as the corresponding indicator dropped to minus 8.6 points from minus 2.4 points in April, according to a new industry report.

For the first time since October 2022, German car manufacturers and their suppliers assessed their current business situation negatively, and “remain pessimistic for the coming months,” the ifo Institute for Economic Research said Tuesday.

However, these companies had previously rated their business situation in April as better, and had a much less pessimistic outlook than in March.

Data from the German Association of the Automotive Industry on Wednesday showed domestic car production decreased by 18 percent year-on-year in May. The electric car market in Europe’s largest economy shrank in particular, with sales of new electric vehicles (EVs) in the first five months of 2024 falling by 7 percent from the previous year.

Ifo experts worry that follow-up impacts of possible European Union (EU) tariffs on Chinese EVs will lead to the further deterioration of the country’s automotive industry.

Last October, the European Commission launched an anti-subsidy investigation into imports of EVs from China. Its decision is still pending.

The possible EU tariffs on imports of Chinese EVs would backfire with a “noticeable impact on bilateral trade and production in Europe”, according to the Kiel Institute for the World Economy (IfW Kiel) last week.

The institute published the results of a simulation study showing that with tariffs of 20 percent, EV imports from China will fall by 25 percent. German carmakers producing in China would also be affected.

The reduction in the number of cars on the EU market can only be made up by cars that were originally for export or by increasing production, IfW Kiel noted. However, as production within the EU is much more expensive due to higher energy, material and labor costs than in China, the tariffs would eventually “mean noticeably higher prices for end consumers,” said Julian Hinz, an expert at the institute.

IfW Kiel added that the simulations did not include countermeasures from China.

Echoing the simulation study results, President of the Federation of German Wholesale, Foreign Trade and Services Dirk Jandura also said that in the end market participants, consumers and companies would emerge as the losers if the tariffs were imposed.