Germany’s carmakers are growing gloomier about their prospects after a disappointing earnings season marked by waning electric vehicle (EV) sales and weakness in China for companies including Volkswagen AG and Mercedes-Benz Group AG.

Business expectations by the German auto industry deteriorated to minus 18.3 points in July, from minus 9.5 points the month before, according to a survey by the Munich-based Ifo Institute published on Monday. Several manufacturers have reported poor financial results in the past weeks.

The German auto industry is struggling with waning demand for EVs after spending billions to ramp up the technology. It’s also under pressure in China, where sales are slowing due to a deepening home sales crisis. Mercedes trimmed the upper range of its annual margin forecast last month, while Volkswagen is pledging deeper cost cuts to counter the slump.

“The auto industry is sliding further into crisis,” Ifo’s Anita Wölfl said in a statement. “A significant improvement is probably not to be expected in the next few months.”

The industry’s capacity utilisation has fallen to around 78%, Ifo said, nine percentage points below the long-term average, as carmakers including VW reduce output at high-cost factories. Over 43% of respondents complained about a lack of orders, up from 29% in April.

Sentiment in Europe’s biggest economy, according to a gauge compiled by the European Commission, is now just shy of the level it was at in February 2022, when a slump took hold after Russia’s invasion of Ukraine.

  - Bloomberg