Europe's biggest economy shrank 0.2 percent in the third quarter compared to the previous period. Economists are not worried and believe it is just a temporary slip.
Image: Imago/photothek/G. Gaertner
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Germany's gross domestic product (GDP) shrank 0.2 percent in the third quarter of 2018. It is the first time the German economy has seen a contraction in more than three years.
The Federal Statistics Office in Wiesbaden announced the contraction on Wednesday. The drop was slightly bigger than the expectation of economists polled by Reuters, who had predicted a 0.1 percent drop.
In the second quarter the GDP of Europe's biggest economy had grown 0.5 percent.
"This is the first drop compared to the previous quarter to occur since the first trimester of 2015," said the Federal Statistics office.
Just last week, Germany's Council of Economic Experts lowered the growth forecast for 2018 to 1.6 percent instead of the 2.3 percent predicted last March.
However, economists believe these results are just a blip and they are not worried about the overall health of Germany's economy.
Andreas Rees, Chief German Economist at Unicredit, said: "This has nothing to do with the fundamentals, on the contrary. The Germany economy will gain strength again in the fourth quarter."
Battery cell production: Is Germany too late to the party?
Germany intends to spend €1 billion to support a consortium looking to produce electric battery cells. Meant to reduce the dependence of carmakers on Asian suppliers and protect jobs, the measure may come too late.
Image: picture-alliance/Imagechina/D. Changzheng
Northvolt's mammoth project
Headed by a former Tesla executive, Swedish company Northvolt aims to build Europe's biggest lithium-ion battery factory, producing 32 gigawatt-hours (GWh) of battery cells a year by 2023. The $4-billion project was granted a loan from the EU and will be built in cooperation with German industrial giant Siemens. Northvolt is carmaker BMW's preferred partner after production starts in 2020.
Image: Northvolt
Tesla head start Germany
US electric car pioneer Tesla, which sources its cells and batteries from its own Gigafactory, has plans to build three more such factories to accompany its first in the Nevada desert (pictured). CEO Elon Musk favors Germany as the location for its European factory. Its Germany-based Grohmann Automation division specializes in manufacturing systems for battery plants, giving Tesla a head start.
Image: picture alliance/dpa/Tesla
CATL thinking big in Thuringia
The chairman of Contemporary Amperex Technology (CATL), Robin Zeng, announced plans in July to build its first battery cell production site in the eastern German state of Thuringia. The factory in Erfurt will have a capacity of 14 GWh by 2022, with carmaker BMW to source €1.5 billion worth of cells from it. China's biggest battery maker plans to create 600 new jobs there in research and elsewhere.
Image: picture-alliance/dpa/P. Zinken
GSR Capital buys Nissan best-seller
Chinese investment firm GSR Capital last year bought Nissan Motor's battery business Automotive Energy Supply Corp (AESC), including battery plants in Japan, the US and Britain. AESC offers cells and modules, and its battery packs (pictured) power the world's best-selling electric car, the Nissan Leaf. Under GSR management, AESC will expand in the UK, hoping to win over more European carmakers.
Image: AESC
Priced Eastern locations
Countries in Eastern Europe appear to be favored by battery makers. Samsung SDI President Jun Young-hyun (left) and Hungarian PM Viktor Orban (center) in May opened a new battery plant in Göd. The Koreans don't make cells in Hungary, but others will. Japan's GS Yuasa in Miskolc, China's SK Innovations in Komarom (launch 2020) and LG Chem in Wroclaw, Poland (launch 2019 with a capacity of 4 Gwh).
Image: Samsung SDI
Carmakers outsourcing
German carmakers are shunning the risk of producing battery cells of their own, relying primarily on cells made in Asia, which some of them — like Daimler in Kamenz, eastern Germany — assemble into battery packs. The luxury carmaker will source cells for its entire EQ electric car model range, launching in 2020, from SK Innovations and LG Chem.
Image: picture alliance/dpa
Volkswagen mulls cell production
Germany's Volkswagen — the world's largest carmaker by sales — is still weighing options. One being cell production of its own at its plant in Salzgitter, Germany. Another alternative to be considered by an electric vehicle strategy meeting of the board on November 16 is an alliance with South Korean cell maker SK Innovation.
Image: picture-alliance/dpa/P. von Ditfurth
Sober-minded calculations
Meanwhile, Germany's biggest automotive supplier, Bosch, dropped plans to produce battery cells, saying the investment required would be too risky. "Given dynamic external market forces that can only be predicted with difficulty, it's unclear whether this investment would pay off," the firm said, after calculating it would have to invest €20 billion to secure a market share of 20 percent.
Image: picture-alliance/dpa/S. Kahnert
TerraE hung out to dry
German efforts to establish cell production suffered a new setback in October, when TerraE — a consortium of 20 companies — failed. None of the businesses named, including Varta Microbattery Systems, Ford and StreetScooter, eventually stepped foward to fund the project. Launched in 2017, the idea was to build two foundries for 34 Gwh capacity by 2028, rivaling Tesla's Gigafactory.
Image: picture-alliance/dpa/A. Burgi
Brussels powering ahead
Fearing the EU auto industry could be left behind in the race, the bloc's energy commissioner, Maros Sefcovic, has launched a "Battery Alliance," offering billions of euros to fund cell manufacturing and research. Germany's newest drive is part of it. Sefcovic believes car making in Europe will be impossible "if you don't master the skills, the innovation and the research linked to batteries."
Image: picture-alliance/abaca/ANDBZ/Monasse
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Problems in the auto industry and weakness in the retail sector are credited with the decline in GDP.
Economists expected a stormy autumn after a strong performance over the summer.
GDP measures the value of goods produced and services provided in a country over a specific period of time. It is used to define how much an economy is growing.
Quarterly GDP compares the growth over a three-month period with the GDP during the previous three-month span. The measurement doesn't provide a broad overview of an economy's health and needs to be evaluated over a lengthier period to detect long-term problems.
