German factory orders fell by a tenth in February in a fresh blow for Chancellor Olaf Scholz as he battles to revive Europe’s biggest economy.
Orders were 10pc lower than a year earlier, despite hopes that demand for the country’s manufactured goods had started to recover.
They were only 0.2pc higher than in January, according to the Federal Statistical Agency, rather than the 0.7pc predicted by economists.
It came as Janet Yellen, the US Treasury Secretary, warned China’s “unfair” subsidies mean its cheap goods are undercutting Western businesses.
The underlying index for German factories, which strips out major one-off orders that can obscure wider trends in industry, shows demand is at its lowest since the worst days of the Covid crisis in June 2020.
Some industries are rebounding. Orders in chemicals rose 3.1pc with pharmaceuticals up 6.6pc.
But in carmaking, which is critical to the nation’s success and its sense of identity, orders plunged 8.1pc.
Eric Heymann, an economist at Deutsche Bank, said that sales of electric cars in particular have been hit by the phasing out of subsidies at the end of last year.
Battery electric vehicles (BEVs) accounted for one car sale in every eight in the first quarter, down from the peak of one-in-four at the end of 2022.
He said: “Without such subsidies, it becomes even more challenging to convince lower-income households, people living in city centres without access to a charging station, families that own “only” one car to cover all mobility needs, and all car drivers that have so far been reluctant to switch to an electric car because the public charging infrastructure (including outside Germany) is perceived as insufficient, the charging times are too long or the range is too short.”
Sales of the newer models will only take off with lower prices, longer ranges, shorter charging rimes and a better public charging infrastructure, he said.
Mr Heymann said: “Chinese carmakers have started to enter the European market with BEVs in the volume segment.”
European officials worry that these cars are being sold at artificially reduced prices, with France excluding Chinese models from new subsidies for EV customers.
Ms Yellen echoed these concerns on a visit to China.
“Direct and indirect government support is currently leading to production capacity that significantly exceeds China’s domestic demand, as well as what the global market can bear,” she said.
The former chairman of the Federal Reserve accused Beijing of “imposing barriers to access for foreign firms and taking coercive actions against American companies”.
“This doesn’t only hurt these American firms: ending these unfair practices would benefit China by improving the business climate here.”
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