German machinery manufacturers aim to expand strongly in the USA
The USA is not only the largest single export market for machinery and plant manufacturers from Germany. Many companies also have a strong presence in the United States and are planning to expand it. A recent survey in which around 350 VDMA member companies took part shows that around a third of them already manufacture in the USA. Three quarters of all respondents intend to expand business activities in the U.S. this year and in the coming year. Around two-thirds of them want to strengthen their own service and sales, 37 percent are planning to expand their production, and 18 percent also want to expand design and development in the USA. According to the survey, two-thirds of the companies plan to increase their local workforces for this purpose. Currently, German engineering companies employ an estimated more than 100,000 people in the United States.
“The United States has long been a market of tremendous importance for engineering companies from Germany and Europe. Both the size of the market and its growth prospects, as well as increasing geopolitical tensions, make it attractive to have a direct local presence,” VDMA President Karl Haeusgen said during talks with U.S. congressmen and decision-makers from the Biden administration in Washington.
The expansion plans are also accompanied by expectations of rising sales. A good 40 percent of the companies surveyed expect a nominal increase of more than 10 percent in their U.S. business in 2022, and another good 40 percent expect growth of up to 10 percent. Expectations for the coming year are similar: 37 percent of the companies anticipate a further nominal increase in sales of more than 10 percent, while 48 percent expect growth of up to 10 percent.
Current figures from the U.S. Department of Commerce on foreign direct investment also show how important the U.S. is for German industry as a whole. According to these, the total volume of German direct investment in the U.S. reached the sum of $636 billion at the end of 2021 – an increase of 21 percent compared to the value at the end of 2020. In the ranking of the most important investors, Germany has thus moved past Canada into second place, while Japan remains the frontrunner. Companies from Germany employ an estimated one million people in the United States.
In the survey, mechanical engineering companies cited market size (86 percent) as the most important reason for expanding in the United States. 64 percent of the companies want to invest in the U.S. because they expect market growth there, 55 percent emphasize proximity to customers. As many as 16 percent want to circumvent so-called “buy American” clauses, i.e., trade hurdles that are intended to force local production in the U.S. in some cases for government-funded infrastructure projects. “Trade barriers have unfortunately increased on the U.S. side toward Europe in recent years. This is hurting companies on both sides of the Atlantic. Both European machinery manufacturers and their U.S. customers would benefit if industrial tariffs were eliminated, conformity assessments were mutually recognized and, above all, no further trade barriers were erected,” Haeusgen emphasized.