Production returns to Europe  – how to use it?

European companies are investing massively in the return of production. In Germany alone, investments worth 633 billion euros are planned. This means huge opportunities for Czech and Slovak suppliers as well. Those who fall asleep may lose out on very lucrative contracts. How to stay in the game and make the most of new opportunities?

Offshoring: When production headed east

Just a few years ago, it seemed clear that if you wanted to be competitive, you had to produce in Asia. Low labor costs and benevolent regulations attracted European companies to massively move production to countries like China and India. This trend, known as offshoring , gained momentum especially after 2000.

The shift of production outside Europe was so intense that it began to affect the employment structure in individual countries. Thousands of jobs were moving abroad, while in Europe there was an increasing emphasis on innovation and research.

This has made China a true “factory of the world.” As reported by CzechTrade, “since 2010, it has held the title of the world’s largest manufacturer for 14 consecutive years. … In 2023, the added value of China’s manufacturing industry reached a respectable $5.57 trillion, accounting for 31.7% of China’s GDP.”

The risks of offshoring are becoming apparent

However, in recent years, the tables have turned. More and more European companies are discovering that offshoring has its pitfalls:

• Disrupted supply chains (see issues during the Covid-19 pandemic)
• Rising labor costs in Asia
• Problems with intellectual property protection
• Geopolitical risks (US-China tensions, Houthi attacks in the Red Sea)
• Pressure to reduce carbon footprint (local production means better control over the supply chain and reduces the ecological footprint associated with long transport routes)

These factors are leading to some production moving back from Asia to Europe (a trend known as reshoring or nearshoring ).

The reindustrialization of Europe is the new reality

The term reindustrialization refers to the effort to rebuild the industrial base in countries that have previously experienced deindustrialization. This process is now gaining momentum in Europe.

According to a recent study by Capgemini, 47% of large European and American companies have already started investing in returning production to their home countries or near abroad . The total planned investment amounts to an astronomical amount of 3.2 trillion euros (about 80 trillion CZK) over the next three years.

Over half of this amount, approximately €2 trillion, is accounted for by European companies. Germany alone plans to invest €633 billion (over CZK 14 trillion) in reshoring .

According to a Capgemini study, the main motivation for the return of manufacturing is the experience of supply chain disruptions in recent years – 70% of managers identified this as a key reason.

What does this mean for Czech and Slovak exporters?

The reindustrialization of Europe also means huge opportunities for Czech and Slovak companies. Many of them are already important links in the supply chains of German and other European manufacturers. The current trend brings them new possibilities, for example:

1. Expansion of existing cooperation: European manufacturers will need reliable local suppliers, and companies that already work with them stand a chance of winning a larger share of orders.
2. New contracts: Opportunities will arise to acquire completely new customers who have so far worked mainly with Asian suppliers.
3. Investment opportunities: Some European companies may seek partners for joint investments in new production capacities in Central and Eastern Europe.
4. Innovation and digitalization: With the return of manufacturing, there will be even greater emphasis on automation and digitalization (so-called Industry 4.0). This will bring demand for innovative solutions.

Success requires moving towards it.

The Czech Republic, Slovakia and other Central and Eastern European countries are perfect for nearshoring. The Czech Republic in particular has long held a very good position due to minimal political and economic risks, high operating costs and relatively low labor costs (compared to Western Europe).

But business opportunities do not come by themselves. For Czech and Slovak exporters, it is crucial to:

• actively communicate with existing and potential customers
• monitor developments in the industry and the plans of major players
• invest in our own innovations and digitalization
• be prepared to respond flexibly to new requirements

An active approach to business development and effective use of the right tools can bring extraordinary success to Czech and Slovak companies in the coming years.

With Intedat you have attractive opportunities at your fingertips

At Intedat, we have been cooperating with a number of Czech and Slovak exporters for a long time. If your company is also export-oriented, we will be happy to help you reach the right people in the right companies and establish profitable cooperation in foreign markets.

You can choose from two solutions:

1. Intedat Connect (quality data)

Do you have your own merchants? Give them cutting-edge data to increase their efficiency. The Intedat company database will become a reliable basis for your business development.

• You can choose from 280 million companies worldwide and 1.5 million companies in the Czech Republic.
• With extensive filtering options, you can easily find ideal prospects worth reaching out to.
• You will get an overview of competent managers, often including direct contacts.
• You can easily connect the data to your CRM/ERP system, export it to XLS/CSV, or work with it in our clear application.

2. Intedat Business (professional addressing of companies)

Don’t you have your own salespeople available for the planned acquisition of new foreign clients? No problem. We have prepared the Intedat Business solution for you.

We will contact selected companies:

• on your behalf and in their language
• taking into account the specifics of the relevant market
• professionally and systematically, using our experience and emphasizing the needs of a specific company

We will then hand over to you only companies that have shown interest in your product or service.

Take your chance

The return of production to Europe is a trend that is likely to grow in the coming years. For Czech and Slovak exporters, this represents a unique opportunity for growth and expansion. The key to success is to be proactive, monitor market developments and communicate effectively with potential partners.

With the help of our Intedat Connect and Intedat Business solutions, you can significantly streamline this process and maximize your chances of success. The future of European industry is being written right now – be there!

Resources:

• Reindustrialization of Europe and the US – Capgemini
• Study: Unternehmen holen Produktion zurück nach Europa – Supply Chain Management (SCM) | News | LOGISTIK HEUTE – Das deutsche Logistikmagazin (logistik-heute.de)
• China ranks first in Asia’s manufacturing index – CzechTrade
• Nearshoring: We are moving away from China and moving production to Europe | BusinessInfo.cz
• The Czech Republic is still the most suitable destination for manufacturing in Europe and fifth in the world | BusinessInfo.cz