Kantar survey: China rated more attractive than Germany - the favorite country outside Europe is the U.S.

• Overall, 40 % of the companies surveyed are planning to set up or expand their production network in Asia.
• Trend toward diversification: 58 % are working on expanding their supplier network outside China as well
• 38 % plan to re-evaluate investments in Germany and Europe due to the Inflation Reduction Act in the USA.

Less than half (40 %) of the companies for which concrete planning has already begun intend to invest in their production network in Germany. Among those with no immediate plans for expansion, only one in three (33 %) can currently envisage future investment in Germany.

The largest group of those who are now planning to expand outside Germany want to invest in Asia (40 % in total, 15 % directly in China). This is followed by Eastern and Central and Western Europe, each with 35 %, and North, Central and South America with 32 % - two-thirds of them directly in the USA.

"Germany as a location has clearly lost its attractiveness for many companies," says Mike Zöller, senior partner and board member of FTI-Andersch, the consulting unit of FTI Consulting in Germany specializing in restructuring, business transformation and transactions. "We also see shifts worldwide: China continues to be an attractive location for the majority of German companies. And other Asian countries and especially the USA are just becoming more interesting again. We are seeing a reorganization of production locations and networks worldwide."

China remains a strong partner, diversification in the Asian region is increasing at the same time

China remains one of the most important locations for German manufacturing companies, with 84 % of those already operating in China stating that they will continue to do so. 73 % also rule out moving parts of their production network out of China - more than one in five (22 %) want to diversify more in Asia in the future and are currently working on a more decentralized network.

A total of 58 % of the companies surveyed are also working on expanding their supplier network in other countries in Asia, and 50 % want to make their European supply chains more resilient. Mike Zöller says, "Asian markets have evolved in many ways. Whether it's Vietnam and Indonesia in Southeast Asia or Bangladesh, it's not just cost advantages, for example in labor costs, that are making these countries increasingly attractive for direct investment. In many cases, massive investments have also been made in infrastructure and workforce expertise over the past decade. As a result, German companies are positioning themselves more and more broadly in Asia."

Opportunities offered by the USA's Inflation Reduction Act must now be examined

Outside Asia, the USA is particularly attractive for investment right now. 21 % of companies are moving forward with concrete plans and want to invest there now. 12 % have already started to implement these plans. One in four companies (26 %) is working on new collaborations or acquisitions with access to the U.S. market.

"In the U.S., companies find a country with a large sales market, lower energy costs as well as with a liberal market economy," says Florian Warring, expert for purchasing and supply chain management at FTI-Andersch and head of this study. "The Inflation Reduction Act of the current Biden administration also has the effect of a large subsidy program for foreign direct investment. We advise companies with expansion plans to explicitly examine what options this currently offers them in the U.S."

In fact, regardless of decisions already made or specific plans now in place about expansion and investment, 38 % of companies said they are reevaluating potential investments in Europe and/or Germany based on the Inflation Reduction Act (IRA). 41 % plan to adjust their supplier structures as a result of the IRA. "Companies therefore need to look now at what opportunities this program, which may be unique for the foreseeable future, offers them," says Florian Warring.

About the Kantar Public survey:

On behalf of the management consultancy FTI-Andersch, the market research company Kantar Public conducted a telephone survey of 150 companies in Germany from the 'manufacturing sector' with a focus on automotive suppliers, mechanical and plant engineering and consumer goods as part of the 'Supply Chain Barometer 2023' study on current issues surrounding locations, production relocations, cost increases and other supply chain topics.

The companies have a turnover of at least 50 million euros. Around one third of the companies surveyed generate more than 500 million euros a year. The %ages were weighted by sub-industry based on their share of the manufacturing sector. The survey period is the second quarter of 2023.

About FTI-Andersch:

FTI-Andersch is a management consulting firm that supports its clients in the development and implementation of viable future/performance as well as restructuring concepts. FTI-Andersch actively supports companies that have to deal with operational or financial challenges and change processes - or want to align their business model, organization and processes for the future at an early stage.

Our clients include, in particular, medium-sized companies and corporate groups that operate internationally. FTI-Andersch is part of the FTI Consulting Group (NYSE: FCN) with more than 7,700 employees worldwide.

www.fti-andersch.com