Race for the Industry of the Future: How Automation Can Save Germany from Looming Deindustrialisation

The word "deindustrialisation" may sound exaggerated to some. Yet the figures speak a clear language: according to a study by the German Economic Institute, more than 50 percent of mid-sized industrial companies in Germany have already begun to relocate parts of their production abroad or to build up capacity outside Germany.¹

The main reason? Rising energy costs, growing international competitive pressure and a lack of planning certainty. Industry accounts for around 23 percent of gross value added; it is the economic backbone of Germany. The central question is: how can Germany preserve its industrial base and regain its competitiveness?

Global trends and geopolitical context

Energy prices as a location factor

Aggressive US industrial policy

With the CHIPS and Science Act (280 billion USD for domestic semiconductor production) and the Inflation Reduction Act (IRA), the US has created massive tax incentives for green industries.⁵ These programmes attract investment from all over the world, including from Europe.

Demographic change

By 2035 Germany faces a shortage of more than 7 million workers.⁶ At the same time, wages in former low-wage countries are rising (for example China: around 10 percent per year), which makes offshoring less attractive.

Automation market

Germany's challenges and opportunities

But which factors have driven this development?

Remaining strengths

Automation as the key

Automation of production processes will change the geopolitical distribution of power, by devaluing traditional advantages such as low labour costs and enabling Western nations to secure and reshore production.

• Productivity gains: Higher production speeds, minimised downtime. Predictive maintenance via sensor data and algorithms reduces unplanned outages.
• Cost reduction: Modern industrial robots are increasingly cost-efficient and often pay for themselves quickly. AI-based production planning optimises the use of resources and energy.
• Quality improvement: Consistent, reproducible processes. Real-time AI quality control reduces reject rates. 3D printing enables complex parts with minimal material input.
• Managing the skilled-labour shortage: Automation takes over repetitive and physically demanding tasks. Skilled workers are freed up for higher-value decision-making roles.
• Greater flexibility: Digital systems allow a rapid response to shifts in demand. Mass customisation becomes feasible through robotics and intelligent production lines.

Investment costs and ROI

Initial investments: hundreds of thousands to millions of euros. Sources of ROI: labour savings, waste reduction, energy efficiency. Standard automation typically pays for itself within 2 to 4 years; complex systems take longer.

Sector comparison: automation potential

The policy framework

Conclusion

Automation and digitalisation are essential to secure Germany's production base. Beyond competitiveness, this is a question of sovereignty: control over strategic industries such as semiconductors reduces dependence on authoritarian regimes and allows Germany to help shape global standards on environmental, labour and human-rights questions.

The question is not whether Germany automates, but whether it happens fast enough not to fall behind the US and China.