INDUSTRY OVERVIEW
The Automotive Industry in Germany
THE INDUSTRY IN NUMBERS
EUROPE’S BIGGEST MARKET
Germany is Europe’s number one
automotive market in production and sales terms; accounting for over 30 percent
of all passenger cars manufactured and almost 20 percent of all new
registrations. Germany also boasts the largest concentration of OEM plants in
Europe. There are currently 43 OEM sites located in Germany. German OEM market
share in Western Europe was more than 51 percent in 2013. Germany is
conveniently located next to Poland, the biggest Eastern European market with
passenger car unit sales of 290,000 (six percent annual increase) in 2013.
MANUFACTURING LEADER
German automobile manufacturers
produced almost 13 million vehicles in 2013 – equivalent to more than 17
percent of total global production. Twenty-one of the world’s 100 top
automotive suppliers are German companies. Germany is the European car
production leader: some 5.4 million passenger cars - and more than 305,000
trucks and buses - were manufactured in German plants in 2013.
GERMANY’S LARGEST INDUSTRY
The automotive industry is the
largest industry sector in Germany. In 2013, the auto sector recorded turnover
of EUR 361 billion – around 20 percent of total German industry revenue. The
automobile industry is one of the largest employers in Germany, with a
workforce of around 756,000 in 2013.
EXPORT SUCCESS
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European Passenger Car Production and
Registration 2013
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Source: VDA 2014.
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German passenger car and light commercial vehicle
manufacturers recorded foreign market generated revenue of more than EUR 200
billion in 2013 - a three percent plus increase on 2012 results. The domestic
market generated revenue of EUR 80 billion (annual 0.4 percent increase) during
the same period.
Around 77 percent of cars
produced in Germany in 2013 were ultimately destined for foreign shores – a new
record. Worldwide, every fifth car that rolls off the production line is made
by a German OEM.
R&D LEADERSHIP
German OEMs are responsible for around one third of
international automotive R&D expenditure, with R&D spend passing the EUR
18 billion mark in 2013 (equivalent to an annual increase of five percent).
Germany’s automotive sector is the country’s most innovative industry sector,
accounting for 33 percent of total German industry R&D expenditure of EUR
55 billion in 2013. German automotive companies are responsible for more than
60 percent of R&D growth in Europe. R&D personnel within the German
automobile industry reached a level of just over 95,000 (three percent annual
increase) in 2013.
most important market for a
number of German vehicle series. 
PREMIUM MARKET HUB
Germany is the world’s premium car production hub thanks to
its world-class R&D, labor force, infrastructure, and automotive
manufacturing heritage. Of all premium branded vehicles produced globally,
approaching 80 percent are German OEM-manufactured. Of all vehicles produced
globally, around two thirds of vehicles were produced in Europe (46 percent
were made in Germany). Within Europe, more than 70 percent of these vehicles
are made in Germany (of which, more badged vehicles). The western European
light vehicle production sector is predominantly premium sector focused. As a
result, the scale and range of production is expanding significantly. German
production of premium segment cars reached a total share of 37 percent of
western European light vehicle production and will continue to grow.
PREMIUM MARKET GROWTH
A broad consensus exists among
reputable industry analysts that, globally, the premium market segment will
grow at a much faster rate than the total passenger car segment in the next
decades. Growth within this segment can
be mainly attributed to growing international demand for high-value, premium
small and compact-sized cars as well as premium SUVs. The German automotive
industry is the leading producer of premium cars worldwide and continues to set
the benchmark in this segment. The German market is ideally positioned to meet
growing international premium demand: Almost all German and German-based
manufacturers have already launched or intend to launch new products meeting
premium segment demand. Excellent production standards, sustainable innovation
and know-how based on the country’s automotive manufacturing tradition will
further strengthen the leading position of Germany as a leading international
automotive manufacturing location.
WORLDWIDE REPUTATION
German products and the „Made in Germany“ label are
associated with positive attributes such as quality, reliability, durability,
efficiency and safety. A GTAI study conducted in 15 major world cities finds
this to be the case in all regions of the world; be it Asia, Africa, Australia,
Europe or the Americas. The study also notes that regional and sectoral
differences in terms of importance attached occur in all but one area: the
automotive sector.
RISING R&D BUDGETS
German automotive company
investment in research and development remains strong as manufacturers seek to
maintain the competitiveness of vehicles “Made in Germany.” In 2012, German automotive
companies spent around EUR 17.4 billion on internal research and development
projects; more than any other manufacturing sector in Germany.
Almost one third of Germany’s to- tal manufacturing industry
R&D expenditure is spent by automotive companies, with R&D budgets
expected to rise. Germany’s automotive companies employ the largest number of
research personnel in the manufacturing sector. With almost 94,000 researchers
(full-time equivalent), automotive companies employ one quarter of the total R&D
workforce in Germany’s private economy.
MOST INNOVATIVE 
PRODUCTION LOCATION
German cars continue to enjoy a globally positive image and
are in high demand across the world. A recent Ernst & Young study of 300
companies (15 percent OEMs and 85 percent suppliers) active in the European
automotive sector finds Germany to be the most innovative automotive hub in
international comparison. Eighty-one percent of those companies surveyed
consider Germany to be the most competitive hub in terms of innovative power
(ahead of Japan and South Korea who polled 65 percent and 61 percent
respectively).
TECHNOLOGICAL TRENDS
ALTERNATIVE DRIVE
SYSTEMS & EFFICIENCY
Automotive engineers in Germany
are hard at work improving internal combustion engine energy efficiency,
developing alternative drive technologies (including electric, hybrid, and fuel
cell cars), and adapting lightweight materials and electronics. Carbon emission
reduction targets, smart traffic management, and the government’s electric
mobility initiative are major drivers for future mobility growth.
According to McKinsey, the
overall market value for new vehicles with optimized combustion engines is set
to reach between EUR 280 and EUR 330 billion by 2020. Impressive developments
have already been made in developing smaller, highly charged-up “homogeneous
combustion” engines and dual clutch transmissions (DCTs). Demand for
alternative drive systems is the result of increased environmental awareness,
rising gas prices, and more rigorous CO2 regulations for new
vehicles. Overall market potential for efficient drive systems is worth between
EUR 325 and EUR 500 billion through to 2020.
E-MOBILITY
Domestic and international
market potential for energy-efficient passenger cars is huge. The global market
is expected to grow by 29 percent annually by 2020. Supported by the country’s
ambitious e-mobility plans, the automotive sector has set itself the goal of
becoming a lead provider and market of electromobility solutions by 2020.
This objective is conceived as
the first part of a three-stage process: 1. Market preparation phase to 2014 -
R&D and showcase project focus; 2. Market ramp-up phase to 2017 -
Energy-efficient vehicle and infrastructure market development focus; 3. Mass
market phase to 2020 - Sustainable business model focus.
The country also has ambitious emobility plans outside
Germany, with German OEMs keen to meet rising export demand for vehicles in the
USA and BRIC countries. Economic growth, the changing mobility requirements of
a young and aspirational population and the relatively low density of passenger
cars are driving demand in the BRIC nations. This will allow Germanbased
manufacturers to successfully follow their proven strategy of increased imports
and increasing on-site production.
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German
Automotive Industry Diversifi ed Strategy –
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Technological
Trends
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CONNECTIVITY - DRIVE SMART
The demand for connected cars
is set to increase significantly, nowhere more so than in the premium segment.
Facilitating a raft of innovative safety, comfort and information services,
smart technologies are revolutionizing the driving experience. According to a
trend study conducted by McKinsey, the number of smart cars will increase by 30
percent annually over the next years.
By 2020, one in five cars will be connected to the internet
- 50 percent of these vehicles will belong to the premium segment. Germany’s
industry strength in electronic technologies and software solutions is crucial
- both today and in the future - for technological advancement in this sector.
SUPPLY CHAIN TRANSFORMATION
The automotive industry is
conspicuously changing in terms of its structure, especially in supply chain
partnerships. The working relationships between OEMs and suppliers have been
transformed by a number of factors including increased model and variety
diversity and shorter product life cycles, modularization and assembly
strategies, high dynamics by the implementation of new technologies, new
e-mobility development activity focus and cost pressures and high capital
intensity levels.
NEW OEM BUSINESS MODELS
Conventional notions of the role of the traditional OEM
within the automotive industry value chain are slowly but surely being
consigned to the past. The classic OEM business model – with its dependence on
turnover generated from new vehicle sales – is undergoing a major paradigm
shift as value creation returns continue to fall. Not only is the modern driver
more discerning in his or her auto-purchasing behavior, but heightened buyer
expectations have created a market in which there is a car for every consumer.
As a result, OEMs have found themselves caught up in a “crowding-out” cycle
where ever more and better technological features are required to stay ahead of
a congested international market. Moreover, technological advances,
historically the sole preserve of the auto manufacturer, are increasingly
taking place on the side of the supplier. OEMs are accordingly differentiating
themselves in terms of brand reputation and service.
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Changing Industry Structures: Development of Share of
Added
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Value between OEMs and Suppliers
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Source:
VDA 2013 (based on Oliver Wyman research).
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INCREASING
SUPPLIER’S ROLE
According
to the German Association of the Automotive Industry (VDA), the role of
suppliers is noticeably increasing; particularly in the production area of
drive trains, internal combustion engines (ICEs) and aggregates, bodywork,
and exteriors. The VDA also forecasts that a visible extension of supplier
activity areas for drive trains, ICEs, electric motors, bodywork and
exteriors will take place through to 2025. According to McKinsey, OEMs will
also have to deal with rising production volumes. Building a local supplier
base, creating an enhanced supply chain, and bolstering capacities are the
result of this development. This is necessary in light of the further
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INCREASING SUPPLIER’S
KNOWLEDGE
Electronics and software
will play a dominant role in vehicle innovation. Approximately 90 percent of
automotive innovations in 2012 featured electronics and software, more
specifically in active safety and infotainment features. This confirms the
notion that supply chain partnerships are becoming increasingly important
within the automotive industry value chain. Eighty-four percent of automotive
industry CEOs ques-
tioned in the PWC 16th Annual Global CEO Survey stress the
importance of strengthening their supply chain partnerships as a top priority
behind meeting customer and client needs (89 percent of those surveyed).
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development of alternative drives. Suppliers will
accordingly become even more important in terms of how much value they add to
the product.
VALUE ADDED IN THE VALUE CHAIN
AUTOMOTIVE INDUSTRY STRUCTURE
The auto industry in Germany
thrives as a result of the diversity of companies active in the sector: large
and medium-sized auto manufacturers alike are to be found in Germany, as are
system and module suppliers, not to mention numerous small and medium-sized
tier 2 and 3 suppliers. In fact, around 85 percent of auto industry suppliers
are medium-sized companies. All of these suppliers provide up to 70 percent of
value added within the domestic auto sector – ensuring that the German auto
industry remains ahead of the competition. Value added is moving to the
supplier side, and increasingly also to non-auto industry sectors (e.g. the
chemical industry in the field of electric mobility). Not unsurprisingly,
international suppliers are increasingly attracted to Germany as a business
location. To date, the world’s ten largest non-German auto industry suppliers
have successfully established operations in Germany.
GLOBAL OEM SUPPLIERS LEADER
Germany boasts 21 of the world’s top 100 automotive OEM
suppliers. Of these 21 companies, 18 belong to the top 50 automotive suppliers
in Europe. Breaking the figures down further still, six belong to the top 25
global suppliers by size. In total, OEM suppliers generated around EUR 70
billion of total German automotive supplying industry turnover in 2013 -
surpassing the previous 2011 record. Exports account for almost 37 percent of
2013 revenue generated by German OEM suppliers. The German automotive industry
recorded a total revenue volume of EUR 362 billion in 2013 – equivalent to a
1.3 percent increase on 2012 revenue. The domestic market accounted for over
EUR 127 billion of this sum, with more than EUR 234 billion turnover generated
in foreign markets (equivalent to a 2.6 percent increase on 2012 revenue). OEM
exports account for almost two thirds of total turnover generated. R&D is a
crucial factor in maintaining this leading position, as German-
Industry
Overview 2014/15 www.gtai.com
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based companies strive to stay on
top of the trends and developments of a market in transformation. This explains
German OEMs’ high R&D outgoings which surpassed the EUR 18 billion mark in
2013 (almost one third of total global automotive R&D expenditure). Central
to the successes enjoyed by German OEMs to date are the skilled teams of
workers who support ongoing development and production. The German automotive
supplying industry employed a workforce of almost 291,000 in 2013. They also
serve Europe’s largest automotive market, where some 5.4 million passenger cars
and 305,000 light commercial vehicles were produced in 2013.
R&D INFRASTRUCTURE
WORLD’S LEADING AUTO
R&D NATION
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Innovation
Intensity – Share of Innovation
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Expenditures
of Turnover 2013
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Automotive
Industry
Electronics Industry
Chemical Industry
Information &
Telecommunication Industry
Mechanical Engineeering Industry
0%
Source: ZEW 2014.
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8.7%
10% 12%
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No other industry invests as
much in R&D – more than EUR 24 billion in 2013 alone. As such, the auto
industry in Germany accounts for more than one third of the country’s total
R&D expenditure. Germany has the highest concentration of all European
automotive OEM and tier 0.5 supplier R&D centers. This makes the country
the most important automotive development activity location in Europe.
Suppliers and service providers located in Germany profit from close client
interaction starting from the pre-development stage. They can take advantage of
joint research activities with some of the world’s leading automotive technology
research institutes and universities.
INCREASING R&D INVESTMENTS
Around 95,000 people were engaged in R&D activity in
2013 (a three percent increase on 2012 R&D workforce levels). As well as
making provision for significant internal R&D expenditure, the German
automotive sector spends a further EUR 6.1 billion in external R&D - this
is equivalent to almost half of the country’s external R&D investments.
Despite record R&D expenditure levels, German companies intend to boost
their R&D activities further still. According to the Ernst & Young
European Automotive Survey, more than 40 percent of German automotive companies
want to increase their R&D investments in the future, while 58 percent will
maintain current R&D spending levels.
WORLD INNOVATION LEADER
Auto manufacturers and
suppliers located in Germany are among the world’s leading patent applicants.
Nine out of the country’s top ten patent filing companies are predominately
active in the automotive industry – proof positive of the country’s importance
within the world’s automotive market and its enormous innovation power.
Germany’s automotive industry remains the country’s leading
industry innovator with a significant share (51 percent in 2012) of turnover
being generated from new product innovations. Sixty-eight percent of companies
active in the sector introduced new products or processes in 2012. Investment
in innovation is constantly increasing, and is expected to reach EUR 47.1
billion by the end of 2014. Complete industry value chain presence ensures that
new and innovative products are made to the highest possible technological
standards. The biggest German automotive supplier alone files on average around
19 patents per working day.
R&D INCENTIVES – GERMANY’S
HIGH-TECH STRATEGY
As R&D is considered to be
among the most important areas for the development of the German economy,
industry and the public sector have made a commitment to spend around three
percent of national GDP per year on R&D activities. This amounts to approximately
EUR 80 billion R&D spending each year. In addition, an unprecedented
campaign to foster the advancement of new technologies has been launched by the
German government.
The High-Tech Strategy represents the first national concept
to bring key-innovation and technology stakeholders together in a common
purpose of advancing new technologies. The initiative combines the resources of
all government ministries, setting billions of euros aside annually for the
development of cutting-edge technologies (R&D projects can also count on
generous financial support in the form of R&D grants).
Industry
Overview 2014/15 www.gtai.com 
AUTOMOTIVE INDUSTRY 
CLUSTERS
The decentralized nature of the automotive industry has
spurred the development of strong R&D business networks. Non-university
research institutes, universities and companies work together in numerous
federal and regional industry and research clusters to improve or invent new
products, solutions, services, and processes. By connecting individual competencies,
major R&D clusters in the automotive industry can be identified. These
clusters have gained international recognition through integrating industry,
science and education in automotive-related areas including mechatronics,
microelectronics, mecha- nical engineering, manufacturing processes, and
material sciences. This has helped the industry to secure an internationally
leading position in a number of technology fields and secured their status as
the international benchmark.
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Automotive Industry R&D
Cluster Examples: Lightweight
Construction
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Carbon
Composites eV (CCeV)
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Association of companies and research institutions
covering the entire value chain of high-performance, fiber-reinforced
composites in Germany (headquarters and four centers), Austria and
Switzerland
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Organizes targeted networking and information exchange
with leading CFRP experts from R&D and production; provides access to
established R&D and manufacturing services; offers cooperation
possibilities at all stages within the entire value chain
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KITe
hyLITE
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Fraunhofer-Gesellschaft led cluster that brings together
more than 30 partners from industry and R&D focusing on the development
of new technologies for hybrid lightweight construction
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Cluster
for Lightweight Design (Leichtbau-Cluster, LC) Landshut
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Network of companies (40 percent), R&D institutes (30
percent) and service providers (30 percent) to assist and promote
cross-industrial cooperation in the field of lightweight design
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Key topics within the Cluster for Lightweight Design are
materials for lightweight design, design of lightweight structures, and
advanced manufacturing technology for lightweight design applications
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INTERNATIONAL RESEARCH
COMPETENCIES
Industrial R&D activities in Germany benefit from a
broad innovation landscape which is home to a diverse array of potential
research cooperation partners. According to the Federal Statistical Office,
institutes of higher education invested around EUR 13.5 billion in R&D in
2011. Germany also offers research cooperation opportunities with the 240
institutes of the four large research organizations: Fraunhofer-Gesellschaft,
Max Planck Society, Helmholtz Association, and Leibniz Association. Their
60,000 researchers are globally acknowledged experts in applied and basic
sciences and economically successful. The Fraunhofer Institute for
Communication Systems ESK in particular is developing state-ofthe-art vehicle
information and communication technologies (ICT). Main competencies lie in the
fields of automotive networks, infotainment and driver assistance, and model-driven
software.
EUROPEAN MARKET PERSPECTIVE
GROWTH MARKETS
The European automotive
industry will perform best in the developing world in the years ahead. At home,
the sector will consolidate its leading market position by around 2.8 percent
annually, largely as a result of development and growth in the premium market
segment. The European share of value added in the premium vehicle segment will
be more pronounced than in other regions, where the segment is comparatively
small or negligible. China will remain a strong performer in the volume
segment, with India also recording a significant increase in demand in the
small vehicle segment. In global comparison, Europe remains the most promising
automotive investment location in valueadded terms. 
COMPETITIVE AND STABLE HUB
The recent PWC 16th Annual Global CEO Survey (automotive
sector in 32 countries) finds that more than 80 percent of automotive industry
CEOs are most concerned by volatile and uncertain growth, with 70 percent of
CEOs questioned concerned by currency fluctuations. The Eurozone’s single,
stable currency provides a further considerable investment advantage to
prospective investors, thanks to the absence of exchange rate volatility.
cludes that German-based
automotive hubs record the highest product quality levels – 88 percent of those
surveyed consider Germany to be the most competitive hub with the best quality
worldwide. Seventyfour percent of respondents also identified Germany as the
world’s most product automotive hub.
MANUFACTURING LOCATION
German companies represent 10 percent of European
manufacturing companies and generate 27 percent of total EU turnover in this
sector. In fact, the manufacturing sector represents more than one fifth of
Germany`s “value added” – one of the highest shares in Europe. Increasingly
more foreign companies are placing their faith in Germany as a vital production
site location, and are benefiting from superior productivity rates and the
country’s excellent business framework of stable labor costs, excellent
production standards and a highly skilled workforce.
In order to maintain European automotive industry
competitiveness and sustainability, the European Commission set up the CARS
2020 Action Plan in 2012. Consisting of concrete policy initiative proposals,
CARS 2020 directly addresses the opportunities opening up in emerging
economies. Central to the initiative’s objectives are four areas of activity:
1. The promotion of investment in advanced technologies and innovation for
clean vehicles, 2. Improve market conditions, 3. Support industry in accessing
the global market, 4. Promote investment in skills and training. Research and
innovation activities will be streamlined under the European Green
Vehicle Initiative, with European Investment Bank cooperation
providing small and medium-sized enterprises with access to credit.
ATTRACTIVE AUTOMOTIVE LOCATION
AUTOMOTIVE FDI MAGNET
According to Ernst &
Young’s European Attractiveness Survey 2014, Germany continues to be seen as
the most attractive FDI destination in Europe. Ernst & Young’s Standort
Deutschland (“Location Germany”) report sees Germany placed as the world’s
fourth most attractive investment location behind China, USA and Russia.
Germany has been able to further exploit its strong industrial base and highly
skilled labor force to attract FDI projects, nowhere more so than in the
automotive sector where it ranked as the number one destination in Europe with
49 projects. Companies within Germany also assess the current business
situation in Germany more positively than in the rest of Europe, with around
two thirds of OEMs assessing the business climate as being “good” or “fairly
good.” This is also confirmed by the Ifo Business Climate Index 2014, which
concludes that business climate, business situation, and business expectations
are all increasing positively.
WORLD CLASS PEOPLE
Germany’s world-class education
system ensures that the highest standards are always met. Eightyfour percent of
the German population have been trained to university entrance level or possess
a recognized vocational qualification – above the OECD average of 67 percent.
Over 30 percent of German university graduates have a natural sciences or
engineering degree background. The mechatronics and automotive engineering
disciplines have recorded remarkable growth levels, witnessing a 121 percent
leap in student numbers in the past decade alone. The comparatively new mechatronics
interdisciplinary program can also boast more than 11,000 students. The auto
industry is the most popular career path among engineers, with manufacturers
and component suppliers among the preferred employers. The steady flow of
mechanical engineers graduating from approximately 100 universities and
colleges helps to ensure the continuity of German engineering excellence – a
guarantor for the sector’s enduring success.
HIGH PRODUCTIVITY
Measured in unit labor costs, Germany experienced a major
increase in productivity the past decade. In marked contrast to other European
countries which have experienced an overall increase in unit labor costs,
Germany’s unit labor costs decreased by a yearly average of 0.4 percent for the
period 2004 to 2011. This made the economy more competitive - particularly
manufacturing.
DUAL EDUCATION SYSTEM
Germany provides direct access to a highly qualified and
flexible labor pool. The country’s dual education system – unique in combining
the benefits of classroom-based and on-the-job training over a period of two to
three years – is specifically geared to meet industry needs. In close
cooperation with industry and the government, the German Chambers of Industry
and Commerce (IHKs) and the German Confederation of Skilled Crafts (ZDH) ensure
that exacting standards are adhered to, guaranteeing the quality of training
provided across Germany.
FIRST CHOICE BUSINESS LOCATION
RELIABLE LOGISTICS
INFRASTRUCTURE
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Average
Corporate Tax Burden of Selected Countries 2012
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Note: 1 National
German average; lower overall tax rates in certain areas are possible, e.g.
22.83% in certain municipalities.
2 Top
corporate income taxation rate; lower starting rates or other special tax
rates available. Example USA: progressive central state rate from 15% to 35%.
3 Local corporate income tax
added.
4 As of April 2013 (according
to OECD)
Source: German Federal Ministry of Finance, 2013
(data as of December 2012)
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Germany’s infrastructure
excellence is confirmed by a number of recent studies including the Swiss IMD’s
World Competitiveness Yearbook and various UNCTAD investor surveys. The
2013–2014 Global Competitiveness Report of the World Economic Forum (WEF)
ranked Germany an excellent third place for infrastructure; singling out
Germany’s extensive and efficient infrastructure for highly efficient
transportation of goods and passengers for special praise. Accumulated in this
score for Germany are high marks for the quality of roads and air transport,
excellent railroads and port infrastructure, as well as its communications and
energy infrastructure.
STABLE ECONOMY
The German economy is on the upswing, with the sound
cyclical dynamism experienced in the economy indicative of broad-based and
sustained upward development. In 2013, GDP recorded an annual average increase
of 0.4 percent. Germany’s Federal
Statistical Office expects 1.8 percent annual average growth of GDP in 2014.
This is a further indicator of the positive feeling among consumers and
businesses alike. As such, economic growth in Germany is expected to be
significantly higher than in the wider Eurozone.
SOUND AND SECURE LEGAL
FRAMEWORK
According to the WEF, Germany is one of the world’s best
locations in terms of planning and operating security. Germany is also one of
the world’s leading nations in terms of intellectual property protection and
protection from organized crime. German regulatory authorities are highly
professional in their operations. The German legal system also counts as one of
the world’s most efficient and independent. Social, economic, and political stability
provides a solid base for corporate investment projects. Contractual agreements
are secure and intellectual property is strictly protected in Germany.
COMPETITIVE TAX SYSTEM
Germany offers a competitive tax system providing attractive
tax rates for companies. In recent years, the German government has implemented
root and branch reforms of the tax system to make the country a more attractive
business location. The German tax system allows for differing tax rates in
German municipalities. On average, corporate companies face an overall tax
burden of less than 30 percent. Significantly lower tax rates are available in
certain German municipalities – up to eight percent less. The overall tax
burden can therefore be as low as 22.83 percent. This makes Germany’s corporate
tax system one of the most competitive tax systems among the major
industrialized countries.
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FINANCING
&
INCENTIVES IN GERMANY
In Germany, investment projects
can receive financial assistance through a number of different instruments.
Besides private sources, these instruments may come from different public
incentives programs with the possibility of program combination available to
all companies - regardless of country of provenance. They fit the needs of
diverse economic activities at different stages of the investment process.
INVESTMENT PROJECT FINANCING
BY PRIVATE EUQITY
Technologically innovative startups in particular have to
rely solely on financing through equity such as venture capital (VC). In
Germany, appropriate VC partners can be found through the Bundesverband
Deutscher Kapitalbeteiligungsgesellschaften e.V (BVK – “German Private Equity
and Venture Capital Association”). Special conferences and events like the
Deutsches Eigenkapitalforum (“German Equity Forum”) provide another opportunity
for young enterprises to come into direct contact with potential VC partners.
Public institutions such as development banks (publicly owned and organized
banks which exist at the national and state level) and public VC companies may
also offer partnership programs at this development stage.
INVESTMENT PROJECT
FINANCING BY BANK LOANS
Debt financing is a central financing
resource and the classic supplement to equity financing in Germany. It is
available to companies with a continuous cash flow. Loans can be provided to
finance long-term investments, working capital and operational costs (R&D,
personnel) and for bridging temporary financial gaps. Besides offers from
commercial banks, investors can access publicly subsidized loan programs in
Germany. These programs usually offer loans at attractive interest rates in
combination with repayment-free start-up years, in particular for small and
medium-sized companies. These loans are provided by the state- owned KfW
development bank and also by regional development banks.
CASH INCENTIVES FOR
INVESTMENTS AND R&D
When it comes to setting up production or service facilities,
investors can count on a number of different public funding programs. These
programs complement the financing of an investment project. Most important are
cash incentives provided in the form of non-repayable grants applicable to
co-finance investment-related expenditures such as new buildings, equipment or
machinery.
R&D project funding is made
available through a number of different incentives programs targeted at
reducing the operating costs of R&D projects. Programs operate at the
regional, national, and European level and are wholly independent from
investment incentives. At the national level, all R&D project funding has
been concentrated in the so-called High-TechStrategy to push the development of
cutting-edge technologies. Substantial annual funding budgets are available for
diverse R&D projects.
LABOR-RELATED INCENTIVES
After the location-based investment has been initiated or
realized, companies can receive further subsidies for building up a workforce
or the implementation of R&D projects. Labor-related incentives play a
significant role in reducing the operational costs incurred by new businesses.
The range of programs offered can be classified into three main groups:
programs focusing on recruitment support, training support, and wage subsidies
respectively.
EXAMPLE: HANGSHENG ELECTRONICS CORPORATION
COMPANY INFORMATION
Hangsheng Automotive
Electronics Corporation is a leading provider of electronics products to the
automotive industry. Founded in 1993 and based in Shenzhen, the company
develops and produces a broad array of automotive electronics products ranging
from in-car entertainment systems to navigation systems, body ECU products to
smart traffic and theft prevention systems.
Particularly strong in the
domestic Chinese market with 95 percent market coverage and 30 percent market
share in China (the company counts 19 of the country’s top 20 manufacturers as
clients), Hangsheng Automotive Electronics has successfully established itself
as a force in international markets - including North America, South Asia, the
Middle East and Russia - and is now on the list of six of the world’s top ten
car manufacturers to be a Tier1 Supplier and continuing to expand its global
export business rapidly.
PROJECT INFORMATION
As part of the company’s rapid export roll-out strategy on
the way to achieving its objective of becoming a billion dollar operation,
Hangsheng Electronics has expanded its global footprint beyond China in recent
years, establishing international operations in the USA, Japan, Russia, and
Germany. For its European activities, the company was looking for a suitable
research and development location.
didn’t
have any idea how to do it - until we met the experts from Germany Trade &
Invest. Since then, we have been receiving professional advice and practical
support in almost every aspect, from laws and regulations, office location
settlement to recruitment questions. This help is crucial for foreign companies
in Germany. If I have any questions now I feel relieved because I know they
will support me.
 |
Michael Bao, Managing Director, Hangsheng
Technology GmbH, Berlin
(part of Shenzhen Hangsheng
Electronics Corporation, China)
|
Success Story – Automotive Electronics
|
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|
Company
|
Hangsheng Automotive
Electronics Ltd.
|
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|
Country of Origin
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China
|
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|
Industry
|
Automotive Electronics/
Connected Car &
Infotainment
|
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|
Company Objective
|
Establishment of a European
R&D Center
|
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|
GTAI Support
|
Company formation
information
Site preselection,
site visit organization
Final site decision support
|
|||
|
Initial Contact
|
January 2013
|
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|
Company Formed
|
May 2013, GmbH formation in
Berlin
|
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|
GERMANY TRADE & INVEST
SUPPORT
After
initial contact was established in January 2013, preliminary discussions
(which formed the basis for further investment project support) between
Hangsheng Automotive Electronics and GTAI took place. GTAI was able to
provide the Chinese company with comprehensive consultancy services
pertaining to company law in Germany, tax and legal considerations, as well
as personnel and recruitment issues. Follow-up meetings were arranged to
provide information specific to the German automotive sector.
|
PROJECT START
On successful conclusion of these activities, Hangsheng
Automotive Electronics indicated a desire to establish a research and
development facility in Berlin. The German R&D offshoot was founded in
May 2013: Hangsheng Technology GmbH,
Berlin. The successful acquisition of Hangsheng Electronics is not a one-off.
An increased number of Chinese automotive technology providers have invested
in Germany in recent years, with Chinese automotive industry suppliers making
significant investment in research and development operations
|
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in Germany.
INVEST HELPS YOU
Germany Trade & Invest’s
teams of industry experts will assist you in setting up your operations in
Germany. We support your project management activities from the earliest stages
of your expansion strategy.
We provide you with all of the
industry information you need – covering everything from key markets and
related supply and application sectors to the R&D landscape. Foreign
companies profit from our rich
STRATEGY
|
their specific
investment criteria. We help turn your requirements into concrete investment
site proposals; providing consulting services to ensure you make the right
location decision. We coordinate site visits, meetings with potential
partners, universities, and other institutes active in the industry.
Our
team of consultants is at hand to provide you with the relevant
|
vestment and put you in
contact with suitable financial partners. Incentives specialists provide you
with detailed information about available incentives, support you with the
application process, and arrange contacts with local economic development
corporations.
All
of our investor-related services are treated with the utmost confidentiality
and provided free of charge.
|
background information on Germany’s tax and legal
system, industry regulations, and the domestic labor market. Germany Trade
& Invest’s
EVALUATION DECISION
& INVESTMENT
PROJECT MANAGEMENT ASSISTANCE
Business oppor- Market entry
tunity analysis and strategy support market research
Project
partner Joint project Coordination and identifi cation management with support of negoand contact regional develop- tiations
with local 
ment
agency authorities
Our Expertise Network
Germany Trade & Invest
provides direct access to all of the relevant actors in the German economy. As
the hub for a far-reaching network at both home and abroad, Germany Trade &
Invest maintains close relations with a number of partners important to
international investors setting up business in Germany. These include all
federal government ministries and the leading associations of the German
economy including the Federation of the German Industry (BDI) and the
Association of the German Chambers of Industry and Commerce (DIHK).
As well as this, Germany Trade
& Invest also maintains close ties to important trade and industry
associations including the Verband der Automobilindustrie (VDA - “German
Association of the Automotive Industry”). Our working partnership with the VDA
allows prospective investors to benefit from the association’s detailed market
analyses and industry structure insights. Together with Germany Trade & Invest’s
business support services, companies who locate to Germany can do so knowing
that the VDA is promoting the interests of the automotive industry both
domestically and internationally.
The German Association of the Automotive Industry (VDA)
nationally and internationally promotes the interests of the entire German
automotive industry in all fields of the motor transport sector, for example in
international trade and economic, transport and environmental policy, technical
legislation, standardizing and quality assurance. To an equal extent, VDA
promotes services in standardization, research and quality. It organizes the
world’s largest trade fair for mobility, the IAA (International Motor Show), as
well as other congresses and it regularly publishes on all automotive topics.
The members of the association
are companies that operate a plant in the Federal Republic of Germany for the
industrial production of motor vehicles and their engines, trailers, special
bodies and containers as well as vehicle parts and accessories.
The VDA consists of about 600
member companies, who have come together to research and produce clean and safe
automobility for the future. In the country that is known for its successful
invention of both automobiles and trucks, the VDA represents the automotive
manufactures and supply companies to ensure the continued competitive
utilization of their experience and skills. The cooperation between
manufactures and suppliers in the VDA is unique in the world of motoring.
Since 1946, the VDA has lobbied
nationally and internationally for the creation of the best possible
automobility. Our goals are safety, quality and sustainability at the highest
technical level. As the representative of the key industry in the German
economy, the VDA is responsible for more than 750 thousand jobs in Germany and
leads a lively dialogue with the industry, the public, politicians, and
customers.
The IAA (International Motor
Show) is held every year. In even-numbered years it is the turn of the IAA
Commercial Vehicles Show. The IAA Passenger Cars Show is held in odd-numbered
years.
The office of the association
is situated in Berlin. The VDA also has an office in Brussels as well as a
location of the VDA China (QMC) in Beijing.
Contact
Verband der Automobilindustrie e. V. (VDA)
Behrenstr. 35
10117 Berlin Germany
T. +49
30 897842-0 F. +49 30 897842-600 info@vda.de www.vda.de
PUBLISHER
Germany
Trade and Invest Gesellschaft für Außenwirtschaft und Standortmarketing mbH
Friedrichstraße 60
10117 Berlin
Germany
T.
+49 (0)30 200 099-555 F. +49 (0)30 200 099-999 invest@gtai.com www.gtai.com
EXECUTIVE BOARD
Dr. Benno Bunse, Chairman/CEO
Dr. Jürgen Friedrich, CEO
AUTHOR
Stefan Di Bitonto, Mechanical
& Electronic Technologies,
Germany Trade & Invest, stefan.dibitonto@gtai.com
EDITOR
William MacDougall, Germany Trade & Invest
LAYOUT
Germany Trade & Invest
PRINT
Asmuth Druck & Crossmedia GmbH & Co. KG, Köln
NOTES
©Germany Trade &
Invest, August 2014
All market
data provided is based on the most current market information available at the
time of publication. Germany Trade & Invest accepts no liability for the
actuality, accuracy, or completeness of the information provided.
 |
ORDER NUMBER
13688
Germany Trade & Invest
Friedrichstraße 60
10117 Berlin
Germany
T. +49 (0)30 200
099-555
F. +49 (0)30 200 099-999 invest@gtai.com
www.gtai.com/automotive
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