Germany is falling massively behind internationally. Around a fifth of industrial value creation in Germany is under threat, creeping deindustrialisation is a real danger and will become a bitter reality without decisive countermeasures. This is the conclusion of the current study “Transformation Paths“, published by the Federation of German Industries (BDI) with the strategy consultancy Boston Consulting Group (BCG) and the German Economic Institute (IW). The focus of the survey is a detailed analysis of the location conditions for the entire industry and industry-related services. Concrete paths were also developed with which the industrial location can be made future-proof and competitive again. The analysis was carried out over the past nine months in cooperation with more than 30 German companies and associations.
The key findings and messages of the study include among others:
- According to the study, around 20% of German industrial value creation is under acute threat. The risk of deindustrialization due to the silent migration and closure of many medium-sized companies is continually increasing.
- Germany is currently lagging behind its international competitors in two thirds of the most important location factors. We are being pushed down in the rankings – instead of being at the top, we are increasingly at the bottom. Berlin and Brussels must finally tackle the issue of competitiveness decisively and with all their might. Because the relatively unattractive framework conditions of Germany as an industrial location compared to other countries have meant that both public and private investments in this country have been significantly lower than the investment rates in other industrialized countries over the past 30 years.
- In order to be internationally competitive in the future, additional private and public investments of €1.4 trillion are needed by 2030. According to the study, companies and households must bear two thirds of the necessary investments. The remaining third is government investment.
Overall, the study shows with brutal clarity that primarily the whole of structural problems slows down the economy. Economic stimulus packages alone are not a solution. We need to move away from treating the symptoms and towards tackling the causes. Politicians must finally move from talking to action.
The figures clearly show what we have long been criticizing and have repeatedly identified as the biggest obstacle to growth and economic success: long-term high energy prices, labor shortages and high taxes are putting a strain on the location compared to other countries. In addition, complex bureaucratic reporting requirements tie up capital and other resources that are missing for investment and innovation. A lack of trade agreements is slowing down the supply of raw materials and trade relations.
For the automotive industry, the necessary areas of action are obvious: Above all, energy prices must become internationally competitive. Other key factors are reducing red tape, creating an internationally competitive tax and levy system, combating the shortage of skilled workers and a geopolitical focus with the conclusion of international trade and raw materials agreements.
Hildegard Müller | VDA President
A strong industrial policy agenda is needed
There is no doubt that the restructuring of the German and European industrial base is one of the greatest transformation efforts since the post-war period. The study has identified 15 necessary fields of action to restore competitiveness, secure the industrial base and accelerate growth. This also means that our industries are highly innovative, invest large sums and have enormous potential – if the environment finally reacts to the challenges, if politics finally makes goal-enabling and competitiveness a priority.
The fact is that the transformation of our economy cannot succeed without the appropriate framework conditions. The German automotive industry is investing large sums in the transformation and in future technologies for more climate protection and economic growth. But our innovations and investments can only have maximum impact if the environment is suitable – if the degree of competitiveness and location attractiveness stands for growth acceleration and not for obstruction. In particular, competitive energy prices, consistent bureaucracy reduction, infrastructure investments, measures to combat the shortage of skilled workers and international trade agreements are needed. Long-term access to raw materials and the conclusion of new international trade agreements must also become a political priority. Europe is currently negotiating over 50 free trade and other agreements worldwide, but some of them are a long way off. Other regions are setting the pace, and we are lost in regulations and a lack of decisiveness.
Politicians are therefore called upon to act now. Otherwise, Germany will continue to fall behind – domino effects would be the logical consequence. “We are running out of time and competitors are way ahead of us,” BDI President Siegfried Russwurm says. He continues: “In order to bring Germany back to the forefront in international competition and achieve our transformation goals, we now need a major breakthrough.”
What do the results of the study mean for the German automotive industry?
In addition to the key areas of action, the study clearly points to the need for financing. The automotive industry has no reason to hide here. From 2024 to 2028, manufacturers and suppliers to the German automotive industry will invest around €280bn in research and development worldwide. The focus of the investments is on transformation, in particular electromobility including battery technology, autonomous driving and digitalization. They are therefore continuing to increase their R&D spending.
The study also impressively shows that this transformation will not succeed without the required industrial policy frameworks – which must ensure that ecological progress, economic competitiveness and technological openness go hand in hand and that the location is thus made fit for the green and digital transformation internationally and at the same time remains a guarantor of growth and prosperity. In order to achieve these goals, German and European politicians must realign their industrial policy agenda towards a “market economy will to reform” and open up opportunities for companies to develop and grow, instead of regulating the processes in small parts.
What is needed now to bring Germany back to the forefront in international competition and achieve the transformation goals? “We must unleash all of this country’s innovation and growth forces and urgently pick up the pace. Then the country will not be helpless in the face of creeping deindustrialization,” says BDI President Siegfried Russwurm. The authors of the study see a great opportunity for Germany in green and digital technologies in particular – they expect that a global market of more than €15 trillion will emerge here by 2030. Germany is in a good starting position, especially in the areas of climate technologies, industrial automation and health. The automotive industry will make its contribution to climate protection.
in VDA, 10-09-2024
