The German automotive industry is currently experiencing a period of economic challenge, as an increasing number of companies are contemplating the relocation of their investments out of Germany. This shift has had a detrimental effect on the overall economy of the country, with the production levels of Germany’s largest vehicle manufacturers declining by more than 36% over the past decade.
A recent survey carried out by the German Association of the Automotive Industry (VDA) has revealed that 85% of automotive suppliers and medium-sized manufacturers are grappling with excessive bureaucracy, while 71% are contending with high electricity costs. The survey has also brought to light a downward trend in orders and a growing inclination among companies to transfer their investments to foreign shores.
The survey has indicated a 35% increase in the number of businesses intending to move their investments abroad, with a mere 1% planning to expand their investments within Germany. The primary destinations for relocation are largely other EU countries, Asia, and North America.
Hildegard Müller, President of the VDA, has emphasised the urgent need for the authorities in Berlin to take corrective action, addressing the issues of excessive bureaucracy and high energy costs, and implementing long-term strategies to bolster competitiveness.
The migration of production to Eastern Europe is emerging as a pervasive trend, with Poland at the forefront as the most appealing destination for investments, followed by the Czech Republic and Romania. Numerous German subsidiaries are already established in Poland, providing employment to approximately 430,000 individuals.
Companies like Mercedes-Benz are expanding their production in Poland, with plans to manufacture electric vans in the country, with the aim of streamlining costs and the supply chain. This pattern is not exclusive to German companies, as foreign companies based in Germany are also making the move to Eastern Europe.
French automotive supplier Valeo has announced the relocation of jobs from Germany to Poland, while Cooper Standard, a manufacturer of sealing systems, also intends to shift jobs from Germany to Poland.
A study conducted by the German Economic Institute (IW) has revealed that more direct investment is leaving Germany than ever before, with approximately $132 billion more going out of the country than coming in. This worrisome trend is attributed to the worsening investment conditions in Germany, such as high energy prices and a growing scarcity of skilled labour.
Christian Rusche, an economist at IW, has issued a warning, stating that should this trend persist, it could signal the commencement of deindustrialisation in Germany.
In conclusion, the German automotive market is confronting a significant downturn, resulting in a migration of investments from the country to other regions, particularly Eastern Europe. Given the current challenges faced by businesses, it is imperative for German authorities to implement measures to enhance investment conditions and sustain the competitiveness of the automotive industry.
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