A growing number of German industrial companies are moving production facilities to international locations as they grapple with rising tariff costs, protectionist trade policies, and domestic location disadvantages. According to a study by Deloitte and the Bundesverband der deutschen Industrie (BDI), 68 percent of surveyed industrial firms are considering shifting their manufacturing—either partially or entirely—outside of Germany over the next two to three years. This figure marks a significant increase from previous years, reflecting what industry experts describe as a “worrying trend” of deindustrialization.
German Industrial Firms Shift Production Abroad Amid Rising Costs
The shift is not limited to production; firms are increasingly relocating research, development, and administrative functions. Data from the Supply Chain Pulse Check indicates that 30 percent of companies plan to move development departments abroad, while 35 percent anticipate relocating research operations.
Regional Impacts and Corporate Decisions
The trend has manifested in concrete closures at established German industrial sites. In Mannheim, the automation and sensor specialist Pepperl+Fuchs announced plans to close production at its headquarters by mid-2027. The company confirmed that it intends to shift its production to international sites as part of a global strategy to move labor-intensive processes to more competitive locations. While the company stated that its corporate headquarters will remain in Mannheim, the move affects between 80 and 90 employees.
Similarly, the Walter AG, a subsidiary of the Swedish Sandvik group, has initiated plans to move parts of its production from Münsingen, Baden-Württemberg, to Gimo, Sweden, and potentially to the Czech Republic. The IG Metall union estimates that this move puts 160 jobs at risk—nearly one-third of the workforce at the Münsingen site.
Strategic Motivations and Market Preferences
While trade tariffs—particularly those associated with U.S. policies—are a primary driver, companies are also citing domestic Standortnachteile (location disadvantages) as a critical factor. A separate study commissioned by the Vereinigung der bayerischen Wirtschaft and conducted by IW Consult found that seven percent of surveyed Bavarian firms expect to cease domestic production entirely.
The preferred destinations for these relocations remain diverse: * Europe: Remains the primary target for 30 percent of firms planning to relocate. * USA: Cited by 26 percent of companies, largely driven by tariff-related incentives to manufacture within American borders. * Asia: China remains a target for 16 percent of firms, while India is favored by 14 percent, and 19 percent of companies are looking toward other Asian nations.
The Risks of Global Relocation
Industry experts warn that shifting production is not a risk-free solution. Jürgen Sandau, a supply chain expert at Deloitte, cautioned that while companies may achieve lower short-term production costs elsewhere, they do not necessarily become more resilient. If the new location does not prove to be a safe harbor, a supply chain standstill can quickly negate all savings effects, Sandau noted.
There are also instances of firms reversing these trends. According to the Deloitte and BDI study, nine percent of companies have returned production from China to Europe, and seven percent have repatriated manufacturing from the United States. Despite these counter-movements, the broader consensus among industry leaders remains pessimistic. Wolfgang Niedermark, a member of the BDI executive board, described the geopolitical environment as a stormy headwind and called for the German government to implement faster, more decisive reforms to mobilize private investment and address competitive disadvantages.
[https://www.tagesschau.de/wirtschaft/unternehmen/industrieunternehmen-verlagerung-produktion-100.html](https://www.tagesschau.de/wirtschaft/unternehmen/industrieunternehmen-verlagerung-produktion-100.html) [https://www.produktion.de/wirtschaft/zollpolitik-beschleunigt-industrieabwanderung/2333635](https://www.produktion.de/wirtschaft/zollpolitik-beschleunigt-industrieabwanderung/2333635) [https://www.merkur.de/wirtschaft/industriekonzern-verlagert-produktion-ins-ausland-das-ist-eine-schweinerei-94413041.html](https://www.merkur.de/wirtschaft/industriekonzern-verlagert-produktion-ins-ausland-das-ist-eine-schweinerei-94413041.html) [https://www.europesays.com/de/389488/](https://www.europesays.com/de/389488/) [https://www.br.de/nachrichten/bayern/studie-bayerns-unternehmen-verlagern-produktion-ins-ausland,V2JTf2e](https://www.br.de/nachrichten/bayern/studie-bayerns-unternehmen-verlagern-produktion-ins-ausland,V2JTf2e)
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