The ifo Institute has reported a marked deterioration in German manufacturers’ assessment of their international competitiveness, with automotive, metals, chemicals, mechanical engineering, and electrical equipment among the sectors reporting the greatest pressure.
Its latest business survey found that 25.4% of companies believe their competitive position in markets outside the European Union has worsened. Within the European market, 17% reported deterioration, while only 5.2% saw an improvement outside the EU and 6.3% reported an improved position within Europe.
The automotive result was the most severe. Some 43% of automotive companies surveyed said their position outside the EU had deteriorated, followed by 29.1% in metal production and processing, 26% in chemicals, and 25.5% in mechanical engineering. Manufacturers of metal products were close behind at 25.3%, while 24.5% of electrical-equipment companies also reported weaker international competitiveness.
Pressure is not confined to export markets beyond Europe. Within the EU, 24.8% of automotive businesses and 22.1% of chemical companies reported a deterioration in their competitive position, indicating that German manufacturers are struggling against both global competitors and suppliers operating inside the single market.
Klaus Wohlrabe, deputy director of the ifo Center for Macroeconomics and Surveys and head of surveys, said: “German industry continues to be unable to make up ground in international markets.” He added that the competitive challenges facing the sector were structural and that short-term economic improvements alone would do little to change them.
That distinction matters because competitiveness is built from variables that cannot all be corrected by a temporary increase in orders. Energy and material costs, labour productivity, plant utilisation, capital investment, regulation, financing, logistics, product differentiation, and the speed at which new technology reaches production all influence whether an industrial site can compete over a full investment cycle.
The ifo survey does not measure manufacturing output directly and it does not prove that every company reporting weaker conditions is losing market share. It does, however, show how companies judge their position against competitors, and the concentration of negative responses in capital-intensive industrial sectors makes the result more significant than a broad confidence indicator.
Automotive manufacturing illustrates the difficulty. Vehicle makers and suppliers are absorbing major investment in electrified powertrains, battery systems, software architectures, manufacturing automation, and new model programmes while competing with manufacturers whose cost structures and supply chains have developed under different conditions. Weak factory utilisation can make those investments harder to absorb, particularly when price competition limits the ability to pass costs on.
Mechanical engineering faces a related problem because machinery is both an export industry and an enabling technology for other manufacturers. A weaker competitive position for German machine builders can affect where production systems are designed, where specialist engineering capability is retained, and which suppliers capture future investment in automation, process equipment, and factory modernisation.
The effect can spread through supply chains. Automotive and machinery manufacturers buy castings, forgings, fabricated metalwork, drives, controls, sensors, electronics, plastics, chemicals, logistics, and engineering services. If large manufacturers reduce investment or shift sourcing, the consequences can move quickly into smaller suppliers whose own competitiveness depends on utilisation and repeat orders.
Chemicals present a different set of constraints. Large process plants are capital-intensive and tightly coupled to energy, feedstocks, utilities, logistics, and downstream customers. Once the operating economics of a site deteriorate enough to redirect investment towards another region, the effect can persist long after the immediate economic cycle has improved.
Electrical equipment is becoming more important as grid investment, industrial electrification, automation, data infrastructure, and renewable generation increase demand for transformers, switchgear, motors, drives, power electronics, cabling, and control equipment. A weaker competitive position does not remove that demand; it increases the risk that a greater share is served by manufacturing capacity elsewhere.
The survey contains one notable exception. Beverage manufacturers were the only industrial group identified by ifo as having improved their competitive position both within and outside the EU. That contrast reinforces the sector-specific nature of the problem rather than supporting a simple conclusion that every part of German manufacturing is deteriorating at the same rate.
The next test is whether the balance of responses begins to improve as investment conditions and demand change. For now, companies reporting deterioration substantially outnumber those reporting improvement, and the weakest readings are concentrated in some of Germany’s most important manufacturing industries. That gives the competitiveness debate a more concrete industrial basis than the usual argument about confidence alone.
