Concern about Germany as a business location: USA attracts record investments from German companies

Concern about Germany as a 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 taken action and launched a huge funding program. The effect can be seen in the figures for investments by German companies.

German companies announced record direct investments in the USA last year. Figures from the data provider fDi Markets, which is part of the business newspaper “Financial Times”, show how, thanks to the billions in incentives from the government under President Joe Biden, the USA is not only getting more capital from Germany than ever, but is also far behind China as a location for German direct investment. fDI counted 185 corresponding investment projects worth a total of 15.7 billion dollars (14.5 billion euros) for 2023. The year before, the value was $8.2 billion. China, which a few years ago was ahead of the USA in terms of capital expenditure by German companies, only came in at just under six billion dollars.

2023 is the first full calendar year since the hundreds of billions of dollars in funding packages with which US President Biden wants to “bring back” American industry came into force. 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 should flow into infrastructure, particularly the climate-friendly restructuring of the energy industry. Companies surveyed by the “Financial Times” cited the strong US economic growth and the realignment of supply chains after the Corona crisis as arguments for their decision.

The largest single investment by a German group in the USA announced in 2023 is the two billion dollar plant of the VW subsidiary Scout, which plans to produce electric pickups in the state of Indiana 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 for a new transformer production site. 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 exported transformers from Germany to the USA, among others. In view of the high demand there, the USA was chosen when looking for a location for expansion.

The growth in investments and the enthusiasm of corporate decision-makers for the USA currently stands in stark contrast to the mood in Germany as an industrial location. In interviews and fire letters, business representatives complain about the danger of deindustrialization. According to a current study by the German Economic Institute (IW), “the basic orientation of economic policy” poses a risk for almost two out of three companies when making their investment decisions in Germany. According to the “Rheinische Post”, the study cites the high burden of bureaucracy, high corporate taxes and a lack of expansion of the digital and transport infrastructure as concrete examples of dissatisfaction with economic policy.

The IW had already identified a record outflow of direct investments from Germany in 2022. Accordingly, German companies invested almost $143 billion abroad, while foreign companies only invested around $11 billion in Germany. The difference represents “the highest net outflow recorded to date.” Corresponding figures for 2023 are not yet available.

According to the “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 planned to increase their investments in the coming years.

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