Concern about Germany as a business location
USA attracts record investments from German companies
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While Germany is discussing the danger of deindustrialization, the US government has already acted and launched a massive support program. The effect can be seen in the figures for investments by German companies.
German companies announced record levels of direct investment in the USA last year. Figures from data provider fDi Markets, which is part of the business newspaper “Financial Times”, show how the USA is not only attracting more capital from Germany than ever before thanks to the billions of dollars in incentives from President Joe Biden's government, but is also leaving China far behind as a location for German direct investment. fDI counted 185 corresponding investment projects for 2023 with a total value of 15.7 billion dollars (14.5 billion euros). The previous year, the value was 8.2 billion dollars. China, which a few years ago was ahead of the USA in terms of capital expenditure by German companies, only managed just under six billion dollars.
2023 is the first full calendar year since the hundreds of billions of dollars worth of funding packages came into force with which US President Biden wants to “bring back” American industry. The law known as the “Inflation Reduction Act” and the “Chips Act” for the semiconductor industry include subsidies, concessional loans and tax breaks worth around 400 billion euros. A large part of the money is to flow into infrastructure, in particular the climate-friendly restructuring of the energy industry. Companies surveyed by the “Financial Times” cite the strong US economic growth and the realignment of supply chains after the Corona crisis as arguments for their decision.
The largest single investment announced by a German company in the USA in 2023 is the two billion dollar plant of the VW subsidiary Scout, which plans to produce electric pickups in the state of South Carolina in the future. Construction has now begun and the foundation stone was laid last week.
Last year, Siemens Energy announced an investment of 150 million dollars for a new site for the production of transformers. The company sees “huge investment potential in the new expansion of the energy infrastructure in the USA,” the Financial Times quoted Siemens Energy board member Tim Holt as saying. In the past, Siemens Energy has exported transformers from Germany to the USA, among other places. In view of the high demand there, the USA was chosen as a location for expansion.
The growth in investments and the enthusiasm of business decision-makers for the USA currently stands in stark contrast to the mood in Germany as an industrial location. In interviews and open letters, business representatives complain about the danger of deindustrialization. According to a recent study by the German Economic Institute (IW), “the basic orientation of economic policy” is a risk for almost two out of three companies when making investment decisions in Germany. According to the “Rheinische Post”, the study cites the high bureaucratic burden, high corporate taxes and a lack of expansion of digital and transport infrastructure as concrete examples of dissatisfaction with economic policy.
The IW had already recorded a record outflow of direct investment from Germany for 2022. According to the report, German companies invested almost 143 billion dollars abroad, while foreign companies only invested around eleven billion dollars in Germany. The difference represents “the highest net outflow recorded to date”. Corresponding figures for 2023 are not yet available.
According to a Financial Times report, the flow of investment towards the USA is likely to continue beyond 2023. According to a survey by the German-American Chamber of Commerce, 96 of the US subsidiaries of German companies in the USA plan to increase their investments in the coming years.
