With news of Europe’s biggest economy, Germany, entering recession after shrinking for the second successive quarter, it is no surprise that a new study reports concern about the future development of Germany’s car market.

Earlier this year authors of the report predicted that sales were going to remain lower by almost 5% in 2008. They say overall production is expected to be higher at 6.3 million units, including passenger cars and commercial vehicles, with a major boost coming from commercial vehicle output which is expected to increase by almost 6.5% by the end of 2008.

TimesOnline reports that Volkswagen (VW) will shed 750 workers before Christmas. Thousands more temporary workers likely to be laid off early in the new year. They further note that this at a time when VW results are looking rather good: deliveries and production will be better than the boom year of 2007 and the company is on course to generate pretax profits of £5 billion.

The car industry, which employs one German in seven, provides a good illustration of the country’s economic gloom. In August sales were 10.4% down on the corresponding month last year, and they are still in a steep decline – down 8.2% in October.

However, the report further notes that increased demand for cars with lower carbon dioxide emissions helped VW, BMW and Daimler make a gain of almost 22%. VW led the market selling 206,819 units, up 19.6% by the end of April 2008. The second and the third highest players in the market were Mercedes and Opel selling 115,685 (up 11%) and 93,292 (up 8.9%) vehicles respectively. The industry also saw some noteworthy improvements in the hybrid technology with the announcement of a joint venture between Audi and Sanyo to develop a pilot hybrid project for the Volkswagen Group.