German industrial output in August was about 9% below its 2015 level, compared with a 2% increase for the eurozone as a whole, according to the European Union’s statistics agency. In Italy, whose manufacturers are closely tied with Germany’s, industrial output rose about 5% over the six-year period.
German manufacturers are struggling to produce cars and factory equipment because of parts and labor shortages. They face surging energy prices that are making sky-high electricity bills even higher. And they must invest hundreds of billions of dollars over coming years to meet new clean-energy standards.
The era of easy foreign trade and rapid globalization has given way to geopolitical tensions, transport bottlenecks and pressure to manufacture locally. Chinese businesses, Germany’s biggest customers, are turning into competitors. Demand for German luxury cars hangs in the balance as the world shifts toward electric vehicles.
At Wilo SE, a pump manufacturer in northwest Germany, sales rose by more than 50% in the eight years through 2017, to €1.4 billion, or about $1.6 billion, driven mainly by new markets such as China. Since then, its sales, most of which come from outside Germany, have been roughly flat.
The shift toward more localized production could mean “less export from Germany,” Mr. Hermes said, meaning fewer jobs in its home country. The company recently said it would close a factory in Eastern Germany, cutting or shifting 120 jobs.
Like other German auto suppliers, Mann+Hummel, a manufacturer of air-filtration systems based in southern Germany, faces a tricky transition as gas and diesel engines are phased out. Its sales declined about 9% last year as global car sales slowed during the pandemic.
German manufacturers have invested in electric vehicles, but such vehicles require far fewer parts than traditional ones. By 2030, 30% to 50% of all new car registrations in the European Union will need to be for electric cars if the continent is to meet its carbon-dioxide emissions targets, according to Deutsche Bank analysts.