German medium-sized companies are restructuring their supply chains in response to global crises. India is becoming more popular, the USA is falling behind – probably also due to concerns about the outcome of the presidential election.
German medium-sized companies are increasingly drawn to India, while the USA is losing popularity in the election year. This is shown by a special survey conducted by DZ Bank among more than 1,000 managing directors and decision-makers, which was made available to the German Press Agency.
According to the survey, 15 percent of companies would like to expand their supply chains towards India over the next five years. In a previous survey in autumn 2022, only a good 10 percent said this. This makes India the “most interesting non-European country for the realignment of supply chains” for medium-sized companies, according to DZ Bank. Many companies have recognized the strong growth dynamics in the most populous country in the world. China is also gaining popularity again – despite tensions with Taiwan, said the representative survey, which took place between March 5 and April 2.
One crisis after another – companies are protecting themselves
After the past crises – including Corona, the war in Ukraine and the rise in energy prices – almost 40 percent of medium-sized companies are planning to restructure their supply chains, it was said. Large medium-sized companies with an annual turnover of 50 million euros or more are particularly drawn to India: almost one in four are planning to expand trade relations.
“The fact that India and, for example, Southeast Asia are becoming increasingly important is mainly due to the fact that companies want to further diversify their supply chains in view of increasing political uncertainty,” says DZ Bank analyst Claus Niegsch.
Fear of Trump: USA losing popularity
When it comes to the USA, however, the euphoria among medium-sized companies seems to be waning, it was said. Low energy costs and huge subsidies from the US government in particular have attracted German companies in recent years. But according to the survey, only twelve percent of those surveyed now want to focus more on the US market in the future (autumn 2022: 15 percent). Nine percent want to withdraw from there. The chemical industry in particular has lost interest – probably also because energy prices in Germany have normalized.
But concerns about a possible President Donald Trump as well as higher tariffs and a European backlash could also have played a role in the survey result, suspects DZ Bank. “Such a development would make the USA significantly less attractive as part of the supply chains.”
Risks and opportunities: Small and medium-sized businesses cannot survive without China
17 percent of respondents also stated that China would become more important for their own business over the next five years. Due to low production costs and close ties, China remains indispensable, says Niegsch. At the same time, around one in ten medium-sized companies plans to reduce trade relations with the country.
The most important trading region remains Europe. According to the study, 21 percent of companies want to expand their supply chains in Western Europe and 24 percent in Central and Eastern Europe. At the same time, around one in ten companies want to move their supply chains away from Europe, according to DZ Bank. “Medium-sized companies are increasingly venturing out of their safe havens again.”
Source: Stern
