The Automotive Industry in Germany –

Driving Performance through Technology

Industry Overview
The Automotive Industry in Germany

and suppliers are world leaders in inno-

Germany is the Geo- vation with more than 3,500 registered
patents every year. With 47 OEM com-
graphic and Economic ponents and assembly plants, 32 indus-
try-related innovative clusters, 3,600
Center of Europe tier 1, 2, and 3 suppliers and Europe’s
most experienced workforce, Germany
If Germany is known for one thing, it’s
is the primary location for technology-
the automotive industry. But we‘re not
driven companies active in all stages of
just sitting back and riding on the coat-
the value chain.
tails of our reputation as the home
of the automobile. Our automotive in-
dustry continues to operate at full
throttle. Automotive is Germany‘s larg-
est industry by turnover, accounting for
more than a third of total domestic R&D
spending. German car manufacturers

Finland

Norway Sweden

Estonia

Moscow
Latvia
Ireland Denmark
< 24 United
Lithuania 30 h >
h by Kingdom
truck RU
15 h > Belarus
< 12
h Netherlands
Belgium
Germany Poland

Luxembourg
Czech Ukraine
Republic

France Slovakia

Switzerland Austria Moldova

Hungary
Slovenia
1.5 h >

Romania
Croatia

Bosnia-
Herzegovina Serbia
Portugal
Spain
Italy Montenegro Bulgaria

Macedonia
Albania

Greece Turkey
3h>

Malta
Member States of the European Union
Cyprus
The German Automotive Passenger Car Production in Europe 2007 in Million Units

Industry in Numbers 6

5.7
5
- Number one automotive market by pro-
duction and sales: accounting for 34 per- 4
cent of all passenger cars produced and
20 percent1 of all new registrations in 3
Europe2

2.6
2

2.2
- 5.7 million passenger cars and 500,000

1.5

1.4
1
trucks and buses produced at German

0.9
0.9

0.8

0.7
plants in 2007 0
Germany

Czech R.

Belgium

Poland
- 25 passenger car assembly plants - more
France

Others
Spain

Italy
than one third of Europe’s installed

UK
capacity
Source: ACEA, 2008
- Over EUR 290 billion in annual combined
revenues for manufacturers and suppli-
ers in 2007 – seven percent growth com-
pared to 2006

- A year-on-year increase of 310,000 units

Change in Passenger Car Production in Europe 2006/2007 in Thousand Units
in passenger car production – by far the
largest in Europe
310

300
- Industry R&D expenditures in 2007 excee-
ding EUR 18 billion - more than a third
200 of total R&D spending in the German
industry
Belgium
117

- 745,000 people work directly in the auto-

Fracne

100
motive industr y - 43 percent of them
92

63
77

18

employed at the supplier level

0
Germany

Czech R.

1
Source: ACEA, 2008
Poland
Spain

2
Italy

European Union 25 + EFTA 3 (Switzerland,

UK

-100
-83

Norway and Iceland)

-169

-200

Source: ACEA, 2008

Industry Overview 2008 www.invest-in-germany.com 3

The Automotive Industry in Germany

The Advantages of Ger- Value Chain

Development Design Manufacturing Distribution
Activity
many as a Location for
Type of Facility R&D Center Design Center Production & Logistics Center
Automotive Investments Assembly Site

No. of Automo- 211 212 25 3 33 4

Advantages abound across all segments
tive Locations
within the automotive value chain. The
in Germany
leading role played by German manufac-
turers and suppliers in the international Germany’s 42% 36% 20% 34%5
vehicle industr y further demonstrates Share of the
Germany‘s competitive edge as an out- European Total
standing business location.
1: OEM R&D centers
2: OEM design centers
Market
3: OEM final assembly plants for passenger vehicles;
Germany hosts the largest concentration
the total number of OEM production sites in Germany is 47
of OEM plants in Europe - creating con-
4: Automotive logistics center
siderable production volume, client and
5: Share of German companies among top 100 European logistics providers
product diversification advantages for sup-
pliers. Established suppliers in Germany Source: Automotive News Europe, Nov. 2006; German Federal Logistics Association
are able to access nine different OEMs (Bundesvereinigung Logistik), 2006; Invest in Germany Research, 2008
and their respective decision centers, 25
assembly plants (an impressive one third
of Europe‘s total installed capacity) as well
as production facilities of almost all top
100 tier 1 suppliers.

Personnel
Germany‘s excellent highly-skilled labor
force has been the key to success for the
German automotive industry. Benefiting
from the country‘s unique education sys-
tem geared to meet industry needs, the
industry can count on a direct workforce of
almost 750,000 highly-trained and experi-
enced people. One in nine employees work
in automotive-related R&D. The steady
flow of mechanical engineers graduat-
ing from approaching 100 universities and
colleges is helping to ensure continuity of
German engineering excellence.

BMW Group, production plant, CO 2 -booth underframe

4 Industry Overview 2008

 Automotive Industry-Related Networks of Competence in Germany

DENMARK

BALTIC SEA
Kiel
BALTIC SEA
Mechatronics/Microsystems Environmental Technology
NORTH SEA
Schleswig-Holstein
Engineering Recycling Technology
Mecklenburg-
Vorpommern
1 Microsystems
Schwerin
3 Hamburg
2
Industrial Manufacturing
Micro and Nanotechnology
1 Adaptronics
Bremen 3 Mechatronics
2 Automotive
Lower Saxony Brandenburg
4 Microelectronics
1 POLAND 3 Carbon Fiber Reinforced Plastics
Hanover 4 Berlin

THE NETHERLANDS Power Engineering 4 Virtual Engineering

Magdeburg Potsdam
2 1 1
North Rhine- 11 Fuel Cells/Hydrogen 5 Mechanical Engineering
Westphalia
2 2 6
Saxony-Anhalt Power Electronics Process Technology
4
2
(Hybrid Engines)
Düsseldorf 5 4 Dresden Materials Science
1 2 Erfurt
1
5 Saxony Traffic and Transportation Component Behavior (Modeling)
Hessen
Thuringia
Automotive Engineering 2 Surface Engineering of Plastics
BELGIUM
1
Wiesbaden 3 and Telematics 3 Lightweight Construction
Rheinland-Pfalz

LUXEM-
Mainz 4 Natural Fiber Composites
BURG 2 CZECH REPUBLIC Information and
1 3 5 Textile Research
Saarland
Saarbrücken Communication Tech.
3
1 Navigation, Telematics
1 6 Stuttgart Bavaria 2 Traffic Systems
FRANCE
3
Baden-Württemberg
3 Software Engineering
1 Munich
4 Virtual and Augmented Reality
4
1
National Border

(Federal) State Borders

(Federal) State Capital

Source: Federal Ministry of Economics and Technology, 2007
SWITZERLAND City-State

R&D Technology Leader infrastructure which supports the con-

Germany is home to 42 percent of all Euro- From machine building to electronics, tinued success of the highly efficient and
pean OEM and tier 0.5 supplier automo- Germany is the technological leader in all smooth operating automotive logistics
tive R&D centers. This makes the country automotive-related industries. environment.
the most important automotive develop-
ment activity location in Europe. German- Physical Infrastructure Incentives
based suppliers and ser vice providers Located at the heart of Europe, Germany Germany offers investment incentives of
profit from close interaction with their offers a sophisticated infrastructure that up to 50 percent of capital expenditure. In
clients from the pre-development stage. integrates state-of-the-ar t transpor ta- addition, extensive support is also pro-
They can take advantage of joint research tion networks with the most modern and vided for employment and R&D purposes.
activities with some of the world‘s leading cost efficient IT and telecommunications
automotive technology research institutes systems available today. Not for noth- Stable Investment Environment
and universities. Numerous innovation ing is Germany Europe‘s number one in Social, economic and political stability
clusters integrate industry, science and logistics. Germany‘s exceptional strength all provide a solid base for your corpo-
education in automotive-related areas in this area has been underlined by the rate projects. Our judiciary and civil ser-
including mechatronics, microelectronics, World Economic Forum‘s (WEF) Global vices are highly professional. Contractual
mechanical engineering, manufacturing Competitiveness Report 2008 in which agreements are secure and intellectual
processes, and material sciences. the German economy took first place property is strictly protected in Germany.
for infrastructure. It is this world class

Industry Overview 2008 www.invest-in-germany.com 5

The Automotive Industry in Germany

Opportunities New Vehicle Programs and Forecast Volumes

in European OEM Plants (SOP 2008 -2012)
No other country in Europe can boast a
comparable concentration of automotive-
No. of New Programs
related R&D, design, supply, manufac- 16
Accumulated Peak Volume in 100,000 Units
turing, and assembly facilities. No other
country in Europe provides the same new
investment opportunities offered by the 12
German industry.

7 8
- Within the next five years, 16 new vehicle
programs - representing an accumulated 5
volume of more than two million units at 4 4
peak - will be launched in Germany. This 3 3
represents one third of all new program 1
launches in Europe within 2008 and 2012.
Germany 20.4

Italy 15.3

France 11.3

Spain 10.8

Czech R. 9.1

Belgium 8.3

Poland 5.4

Portugal 3.0

Sweden 2.0

UK 1.1
- German vehicle manufacturers are com-
mitted to delivering further CO 2 emission
reductions. The goal for 2012 is clearly
set by the European Commission - new
vehicles are to produce not more than Source: European Light Vehicle Industry Forecast, Global Insight, 2007
130 g/km by means of vehicle technology
improvements and other contributory fac-
This approach translates into a strong - The industry is supported by an active
tors. A further 10 g/km reduction is fore-
demand for innovative products that en- innovation policy and significant pub-
seen through other improvements and
hance fuel economy and energy efficiency. lic investments. A total of EUR 15 billion
increased use of bio-fuels. The industry
Powertrain solutions providers, battery has been made available by the German
is building on the country‘s longstanding
manufacturers, advanced materials (includ- Federal Government for R&D projects
experience in environmental technologies
ing light metals and composites) suppliers, in cutting edge technologies. Applicable
to secure a leading position in all fields of
and electronics systems suppliers are all research fields in the automotive industry
sustainable mobility.
finding unique business opportunities in include: alternative fuels, fuel cell tech-
Germany. nology, alternative powertrain and energy
storage systems, active safety, vehicle-to-
X communication and traffic management
systems. All companies active in Germany
(regardless of country of provenance) are
eligible.

Mercedes-Benz Direct Hybrid concept vehicle

6 Industry Overview 2008

Incentives for Investments
in the Automotive Industry
Germany offers numerous incentives for
all investors - regardless of whether they
are from Germany or otherwise. There is
a large selection of programs designed
to support a wide variety of business
activities at different stages of the invest-
ment process available. Support ranges
from cash incentives for the reimburse-
ment of direct investment costs to incen-
tives for labor and R&D.

Types of Incentives

Incentives

Investment Incentives Package + Operational Incentives Package

Cash Incentives Reduced Interest Public Guarantees Labor-Related R&D Incentives

Loans Incentives

Investment Grant State Grants

KfW Loans Recruitment
(National Level) Support
Investment Combined State/ Loans
Allowance1 State Development Federal Training
Banks Support
Silent/Direct
Partnership
Wage Subsidies
1)
only in eastern Germany Source: Invest in Germany Research, 2008

The amount of these investment incen-

Germany’s Investment tives generally depends on three factors:
project scope, investor company size and
Incentives Package the new investment location. Investment
incentives can reach up to 50 percent of
Investors’ production facility set-up costs
eligible expenditures once these factors
can be significantly reduced using a num-
have been considered.
ber of different measures from Germany’s
extensive investment incentives package.
The package consists of cash incentives,
loan programs offering reduced interest
rates and public guarantees at state and
national level.

BMW Leipzig plant,

central building:
Production BMW 3 Series

Industry Overview 2008 www.invest-in-germany.com 7

The Automotive Industry in Germany
Cash Incentives
The main instrument of Germany’s invest-
ment incentives package are cash incen-
tives provided in the form of direct
investment grants. Germany will make
more than EUR 2.3 billion in cash incen-
tives available in 2008.
Investment grants are offered in sev-
eral incentive regions in Germany. Eligi-
ble investment costs include the purchase
or production costs of buildings, machin-
ery and equipment. The purchasing costs
of intangible assets are likewise eligible.
In general, investment projects must cre-
ate long-term jobs in order to benefit from
investment grant provision.
In eastern Germany, investment grants
are complemented by the Investment
Allowance (Investitionszulage IZ), which is
usually provided in the form of a cash pay-
VW plant Wolfsburg – Golf GTI and Golf R32 production (body construction)
8 Industry Overview 2008
ment and/or tax credit. As with investment The provision of such loans makes it easier
grants, eligible Investment Allowance for investors to access additional funding
costs include the purchase or production from public banks.
costs of buildings, machinery and equip-
ment. Because the Investment Allowance Public Guarantees
is a tool specifically created to support the The investment incentives package is com-
eastern parts of Germany, all equipment pleted by public guarantees. This tool is
financed through the investment allow- offered by the state and the federal govern-
ance must remain in eastern Germany for ment to help secure private bank loans.
at least five years upon completion of the
investment project.
Interest-Reduced Loans
Special loan programs make up a second
component of Germany’s investment incen-
tives package. They are offered by publicly
organized financial institutions.
These programs usually offer loans at
below-market interest rates and subordi-
nated loans similar to equity.
Germany’s Operational
Incentives Package
Labor-Related Incentives
Labor-related incentives are available
throughout Germany. The Federal Employ-
ment Agency and all German states offer
a range of different labor-related incentives
programs. They can be divided into three
main groups: programs focusing on recruit-
ment support, training support, and wage
subsidies respectively.

Incentives for R&D Projects

Germany offers several incentives pro-
grams targeted at reducing the operating
costs of R&D projects. Programs operate
German Aerospace Center (DLR), Automotive drive simulator
at the regional and national level wholly
independent from investment incentives.
The High-Tech Strategy: Sectors with Relevant Budgets 2006-2009 in EUR Million
At the national level, all R&D incentives
programs are subsumed under the Fed- Most R&D projects related to the automotive industry are financed through programs
eral Government’s four-year High-Tech focusing on automotive and traffic technologies providing an incentives budget of
Strategy. The High-Tech-Strategy defines EUR 770 million. According to application focus, possibility exists to participate in
specific sectors with a high dependency on other funding programs (e.g. materials, production, microsystems, et al.).
new high-tech developments. Each sector
comprises various R&D programs. More
Space technologies 3,650
than EUR 770 million is available for R&D
Energy technologies 2,000
projects in the automotive and traffic tech- Information and communication tech. 1,180
nologies sector. Health research and medical technology 800
Automotive and traffic technologies 770
Nanotechnologies 640
Biotechnology 430
Environmental technologies 420
Materials technologies 420
Optical technologies 310
Plants 300
Aviation and aeronautical technologies 270
Production technologies 250
Microsystems technology 220
Maritime technologies 150
Security research 80
Services 50

Source: German Federal Ministry for Education and Research (BMBF)

Industry Overview 2008 www.invest-in-germany.com 9

The Automotive Industry in Germany

Invest in Germany Closely Supports Your Project Management

Team throughout the Entire Investment Decision Process
Investment Decision Process – Areas of Invest in Germany Support

Investment Process Milestones

Strategy Evaluation Decision and Investment

- General market information

- Industry guides/reviews
Information
Invest in Germany Key Support Areas

- Conditions for investment, e.g. economic data,labor market,

incentive programs, and tax & legal framework

- Proactive identification
Consulting
of business opportunities
and Project
- Identification of project-
Coordination
specific location factors
- Discussion of market
entry strategies
- Advice on project financing
- Model calculation
of potential incentives
- Cost factor analysis
- Identification of possibilities
for cooperation with suppliers,
R&D institutes, technology
partners, etc.
- Organization of site visits
and fact finding missions
- Contact with the economic
development corporations of
the German states
- Support with final
site decision
- Selection of project partners
and facilitators (service
providers,financial partners)
- Negotiations with
relevant authorities
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application process
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to the economic develop-
ment corporation in the
selected state

Invest in Germany Helps You
Our teams of industry experts in the auto-
motive and related industries will assist
you in setting up your operations in Ger-
many. From design and engineering cen-
ters to manufacturing and assembly
plants, we can support your project man-
agement team from the earliest stages of
your expansion strategy.
We do this by providing you with all the
industry insider information you need –
covering ever y thing from automotive
markets and segments to industry trends
and the supplier landscape; automotive
technology R&D to industry regulation and to provide you with the relevant back-
the domestic labor market. ground information on Germany’s tax
and legal system.
Profit from our experience and know-
how to identify the investment location Invest in Germany’s financial exper ts
which meets your specific investment help you create the appropriate financial
criteria. We help turn your requirements package for your investment and bring
into concrete investment site proposals, you into contact with suitable financial
providing free consultation ser vices to partners. Specialists provide you with
ensure you make the right location deci- detailed information about available
sion. We coordinate site visits, meetings incentives, support you with the applica-
with potential suppliers, service provid- tion process, and arrange contacts with
ers, technology par tners, universities local economic development corporations.
and other institutes active in the automo- Take advantage of our range of free of
tive field. Our team of experts is at hand charge services.

10 Industry Overview 2008

Picture credits Cover
Photograph: ©Daimler

Page 2 Germany is the Geographic and Economic Center of Europe

Graphic: ©www.typoly.de

Page 4 The Advantages of Germany as a Location for Automotive Investments

Photograph: ©BMW Group

Page 6 Opportunities
Photograph: ©Daimler

Page 7 Incentives for Investments in the Automotive Industry

Photograph: ©BMW Group

Page 8 Incentives for Investments in the Automotive Industry

Photograph: ©Volkswagen

Page 9 Germany’s Operational Incentives Package

Photograph: ©DLR – Institut für Verkehrssyteme

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Director Marketing Communications: Bettina Knape
Contact Automotive Industry: automotive@invest-in-germany.com

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Note
©
Invest in Germany, April 2008
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