15% of German Firms Plan Supply Chain Expansion in India Amid Growing Appeal

According to a recent DZ Bank survey, German businesses are becoming more interested in India; 15% of them intend to extend their supply chains there. When compared to autumn 2022, when the percentage was a little over 10%, this is a notable increase.

Large and medium-sized businesses with yearly sales of at least 50 million euros find India particularly appealing; nearly one in four of them intend to increase their trade connections. Compared to roughly 15% in the fall of 2022, this represents a significant increase.

Food, chemicals, plastics, metals, vehicles, and mechanical engineering are among the industries that benefit from India's appeal. Still, the nation is less attractive to the electrical industry.

A Renewed Interest in China

China is becoming more significant for German businesses as a commercial partner at the same time. By autumn 2022, the number of businesses planning to leave China had surpassed the number of businesses still operating there. 17 percent of respondents now anticipate China to become more important for their organization within five years, reversing the previous trend. However, about 10% of medium-sized businesses intend to cut back on their trade with China.

Claus Niegsch, an industry analyst at DZ Bank, states that "China remains an indispensable partner for medium-sized companies due to the wide range of goods, low production costs, and close integration." He points out that businesses' desire to diversify supply chains in the face of growing political unpredictability is primarily responsible for Southeast Asia's and India's growing prominence.

The report does, however, provide a warning against minimizing geopolitical hazards. Businesses may minimize the dangers of strong economic relationships if they are enticed by large profit margins and a wide range of raw materials and completed goods.

The United States' declining attractiveness

Medium-sized German businesses are becoming less excited about the US market. Even though the USA is now Germany's most significant trading partner, overtaking China, just 12% of the surveyed companies intend to increase their attention on the US market going forward, compared to 15% in 2022. Furthermore, 9% of businesses are thinking about leaving the US market. Analysts at DZ Bank believe that this hesitation may be related to concerns about economic policies in the wake of a Donald Trump election victory.

Europe continues to be stable

Medium-sized firms still mostly locate their supply chains in Europe. Focusing on Central and Eastern Europe is the goal of one in every four businesses. Twenty-one percent of companies have plans to grow their supply chains in Western Europe, and twenty-four percent are concentrating on Central and Eastern Europe. This represents a three percent increase from 2022. However, over 10% of businesses also state that they want to move their supply networks outside of Europe.