New procurement markets for the German economy – update 2024

In 2023, German companies obtained 53 percent of their intermediate products from EU countries. With a share of nine percent, China remains the most important single procurement market for German industrial companies. However, companies are increasingly aware of the risks associated with over-dependence on individual supplier countries. In addition to efficiency, the resilience of supply chains is therefore becoming increasingly important. By tapping into new procurement markets, companies can minimize the risks in their supply chains.

On behalf of the Bavarian Business Association (vbw), we analyzed potential new procurement markets for German and Bavarian key industries. This provided an update to the previous study from 2023.

New procurement markets with potential

The analysis of the global supply of intermediate products shows that there are alternative supplier countries beyond the current German procurement markets in almost all intermediate product categories.

The East Asian region is particularly promising:

• South Korea and Japan in particular offer a very broad range of intermediate inputs that German and Bavarian industry sources from the world market.
• In addition, both countries have concluded a free trade agreement with the EU and have good institutional framework conditions.

Results for the North American procurement markets:

• Mexico and Canada offer preliminary services in several product groups that are important for Germany and also have a free trade agreement with the EU.
• When purchasing preliminary products from the USA, customs duties and non-tariff trade barriers can complicate imports, as there is no free trade agreement. However, the size of the market and the wide range of different products speak in favor of the USA.

As for the Asian emerging markets,

• they are characterized by high growth momentum and a strong competitive position in the fields of electrical equipment, data processing equipment, electronics and optics.
• In addition to selected ASEAN countries such as Indonesia, Malaysia, Singapore, Thailand and Vietnam, India in particular is an attractive procurement market for German companies.
• Trade with these countries is often hampered by trade barriers, as free trade agreements are only in force in a few cases.

Factsheets for nine product groups

The current German procurement markets differ considerably in some cases for the individual product groups. Even within a product group, there are very different procurement structures in the individual product categories. This also applies to the potential alternative supplier countries: the countries have often specialized in the production of certain intermediate products, so there is no “single” potential market for a product group.

The study provides fact sheets for nine product groups that offer an initial overview of the new procurement markets that could be available for the individual product categories.

Our approach

The analysis of the procurement markets focuses on nine product groups that are part of the industrial core of Germany and Bavaria. These industries obtain the majority of their intermediate inputs from abroad and then process them further. Specifically, these are:

• Chemical products
• Pharmaceutical products
• Metals
• Metal products
• Data processing equipment, electronics, optics
• Electrical equipment
• Machinery
• Motor vehicles and parts
• Rubber and plastic products

For each product group, we use foreign trade data analysis to quantify where the current and where the currently underdeveloped procurement markets are in the individual product categories. In addition, we have used a traffic light system to assess the extent to which these procurement markets pose a geopolitical risk and how good market access is for German companies.

Links and downloads

Study (vbw website, in German)

Summary of the previous study (in German)

Project team: Philipp Kreuzer, Johann Weiß

Last update: 29.11.2024