Fortune is reporting the United States has become an attractive location for German companies to invest in. In fact, the trend goes back to last year.
They're attracted to the strong economic outlook, of course, but also to the lucrative tax incentives. This is as conditions in their home market and China, the country's largest trade partner, begin to worsen.
Financial Times reports that German corporations announced a $15.7 billion capital commitment in American projects dating back to last year, nearly double the investment from a year prior. It also dwarfs the amount they have pledged to China.
The number makes up 15% of total commitments in 2023, either in greenfield or expansion projects overseas, compared to 6% a year earlier.
The Boom
The boom occurred just a year after the Biden administration passed the Inflation Reduction Act and the Chips And Science Act, which offer more than $400 billion in tax credits, loans, and subsidies with the goal of rebuilding United States manufacturing and pushing energy transition.
German companies announced 185 capital projects in the U.S. in 2023, 73 of which are in the manufacturing sector.
The largest of them was a $2 billion investment in Volkswagen's Scout Motors electric vehicle subsidiary in Columbia, South Carolina.
What Experts Are Saying
Senior executives and Siemens Energy and BASF, two large German companies, have stated a combination of pragmatic US governmental policies and a strong long-term market outlook, as well as increasing focus on supply chains, was driving US investment.
"We see this huge investment potential with the new buildout of energy infrastructure in the US," said Tim Holt, an executive board member of Siemens Energy, which this month announced plans to build a $150 million power transformer plant in Charlotte, North Carolina.
"In the past, we have pretty much exported transformers from Germany, from Austria, from Croatia, and from Mexico into the US. But given the market size and that we needed to do an expansion, we looked and we said the new factory is a good investment case given the market outlook."
A survey of 224 German subsidiaries in the United States published two weeks ago by the German American Chamber of Commerce found that 96% of those surveyed are planning to expand investments by 2026.
BASF, the world's largest chemical group and a big-time investor in China, is also expanding its operations. The German economy is Europe's largest, which made it one of the most vulnerable to the departure of cheap Russian petroleum products.
