Investment activity in Germany has continued to weaken: In light of business expectations, medium-sized automotive companies are increasingly holding back on investments in Germany. This is one of the findings of a recent survey conducted regularly by the VDA among automotive suppliers (Manufacturer Group III) and medium-sized manufacturers of trailers, bodies, and buses (Manufacturer Group II) since spring 2020.*
In the current survey, 75% of companies stated that they were postponing, relocating, or completely canceling planned investments in Germany. In the previous survey in October, this figure had fallen to 69%, but has now risen significantly again. Also increasing has been the shift in investments abroad, which, according to the new survey, around one in three (29%) companies are planning (October 2024: 23%). A further 14% plan to cancel investments, and only 1% of companies stated that they intend to increase their investments in Germany in light of the current situation.
Investment activity in Germany is primarily impacted by labor costs (58%). The sales situation/sales expectations for the German and European automotive market also play a role for 56%. The outlook for the German and European automotive market, in particular, does not necessitate expansion investments – market growth is taking place elsewhere.
Another finding: The majority of mid-sized automotive companies assess 2025 so far negatively. While in the previous survey in October of last year, 17% of the companies surveyed expected their business activities to improve in 2025 compared to the previous year, only 13% expect this in the current survey. 43% anticipate that their economic development will deteriorate this year. 45% expect the situation to remain roughly the same as last year.
Excessive bureaucracy is the No. 1 challenge – and also an obstacle to investment
The biggest challenge for medium-sized automotive companies continues to be excessive bureaucracy: 90% of companies report being heavily or very heavily burdened by bureaucracy. This is consistent with the fact that 93% of companies stated that the next federal government should make reducing bureaucracy a priority of its work. The survey also shows that the density of bureaucracy and regulation also negatively impacts companies’ investment activity; every second company (50%) stated that it is negatively impacting investment activity in Germany.
VDA President Hildegard Müller: “In terms of bureaucracy, the supplier industry, and especially the numerous medium-sized companies in the German automotive industry, has long since exceeded its limits of stress and pain – things cannot and must not continue like this. Genuine, consistent bureaucracy reduction must be at the top of the agenda of a new federal government. Importantly, measures to reduce bureaucracy must take much greater account of the backbone of our industry, the industrial SMEs. If the future federal government fails to address the issue of bureaucracy, the danger will continue to grow that the automotive SMEs will be forced to turn even further away from Germany – with correspondingly negative consequences for growth, prosperity, and employment.”
Energy prices as a locational disadvantage
High energy prices continue to represent a significant locational disadvantage: 61% of companies are heavily or even very heavily burdened by electricity prices, and 50% by gas prices. This is consistent with the fact that eight out of ten companies (79%) support reducing energy costs as a policy priority. In the survey, 75% of companies also stated that they are heavily or very heavily burdened by taxes and duties. 78% of companies support easing reporting requirements and statistics, 69% support reducing labor costs, and 65% support reducing taxes and duties.
“As international competition between locations intensifies and geopolitical pressure continues to grow, the competitiveness of Germany as a business location is eroding – this is having a particularly noticeable impact on small and medium-sized enterprises. However, this challenging situation has remained politically inconsequential for far too long. The program of a new federal government and the coalition negotiations must therefore be: We need an ambitious program for locational attractiveness and competitiveness with concrete reforms. Given the rapidly changing global situation and the diverse global challenges, politicians in Berlin must focus on everything that creates growth. After all, economic strength is the foundation and basis for overcoming the diverse global challenges and being able to survive in the long term,” Müller emphasized.
US tariff policy: More than half fear negative impact on sales and profits
86% of the companies surveyed expect that the US tariffs against numerous states and regions will also affect them. About half of these companies (54%) expect to be indirectly affected, for example, through suppliers and customers. Around one in three companies (32%) sees themselves as directly affected.
More than half (57%) of the companies that believe they will be directly or indirectly affected expect that US tariffs and possible countermeasures by the affected states and regions will have a negative impact on sales and profits. Furthermore, 25% of the affected companies fear disruption to supply chains and supplier networks, while another 17% are considering relocating their own locations and production capacities as a possible consequence. The survey clearly shows that the uncertainty caused by US tariff policy is having a noticeable impact on companies’ strategic planning and risk management.
Companies reduce employment
Currently, 41% of companies complain about suffering from a shortage of skilled workers and labor. While this is a slight increase compared to the last survey (October: 37%), the figure is still comparatively low. By comparison, in spring 2023, it was 85%. The proportion of companies that stated they are having difficulties meeting their short- and medium-term demand for skilled workers is also comparatively low at 33%. These figures are a further alarm signal, as they show that the weak overall economic development, particularly in industry, is increasingly having an impact on the labor market. More than half of the companies surveyed (56%) also stated that they are currently reducing employment in Germany (October: 54%). Only 11% are currently increasing employment in Germany.
*The survey was conducted from February 11 to 26. 150 companies participated, providing the VDA with representative information on the current situation and prospects of the automotive industry.
SOURCE: VDA
