The news came ahead of a conference call that Chancellor Angela Merkel will hold with representatives of the German auto industry on Tuesday to discuss the impact of the coronavirus pandemic on production and sales.
Ifo said its survey of 75 auto firms showed a current business index for the sector fell to -85.4 points in April from -13.2 in March. The April reading fell below a reading of -82.9 points registered in April 2009, during the financial crisis.
“We have never seen such bad figures for this key sector,” said Klaus Wohlrabe, head of forecasting at Ifo.
Sub indices on orders, and production expectations and export prospects all fell, with capacity utilisation down to 45%.
The pandemic hammered first-quarter profits and forced both carmakers to drop their outlooks for the year.
Car sales across the world have slumped as measures to contain the pandemic forced production lines to shut and showrooms to close, starving manufacturers of much needed cash for investments.
Volkswagen restarted production at its Wolfsburg factory in Germany last week, the latest of a fleet of European carmakers to take advantage of eased coronavirus lockdown rules to resume manufacturing.