Europe in the race for artificial intelligence and automation: Strategies to strengthen competitiveness

Europe in the global race for artificial intelligence and automation: challenges, strategies and the path to strengthening competitiveness

The European robotics and automation industry is undergoing a period of profound change and faces existential challenges that will significantly determine its future position in global competition. Recent forecasts from the German Engineering Federation (VDMA) paint a worrying picture: a 9% decline in revenue is expected for 2025, which would reduce industry revenue to €13.8 billion. This projected decline is not merely a short-term dip, but rather points to structural weaknesses and growing international competitive disadvantages that strike at the very core of European industry.

While other global players, particularly China and the United States, are massively expanding their positions in robotics and automation, Europe appears to be falling behind. China has nearly doubled its robot density in recent years and is aiming for even more aggressive expansion. The US is increasingly relying on protectionist measures and massive government subsidy programs to strengthen its domestic industry and weaken foreign competition. In this dynamic and increasingly competitive environment, Europe must act urgently to avoid being left behind and to maintain its technological sovereignty.

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The VDMA (German Engineering Federation) has recognized the urgency of the situation and presented a comprehensive "Robotics Action Plan for Europe." This plan is a wake-up call to policymakers and businesses, demanding targeted measures to strengthen innovation, improve the scalability of companies, and increase the market penetration of European automation solutions. This report analyzes the key drivers of this crisis, highlights the global disparities in robotics and automation, and, based on the VDMA strategy, develops detailed recommendations for action to lead Europe out of this difficult situation and sustainably strengthen its position in global competition.

Structural weaknesses of the European robotics industry: A look inside the challenges

The European, and in particular the German, robotics and automation industry, which achieved record sales of €16.2 billion in 2023, is facing a turning point. One of its biggest structural weaknesses lies in its historically strong dependence on the domestic automotive industry. This sector, once the engine of German and European economic growth, is itself undergoing a profound transformation. The shift to electromobility, the need for new drive technologies, and ongoing global supply chain problems have led to significant sales difficulties. Since the automotive industry is a major consumer of robotics and automation solutions, its problems have a direct and substantial impact on demand in the automation sector.

In 2024, domestic orders in the robotics and automation sector plummeted by an alarming 16%. While foreign business was able to partially offset this decline, the fundamental weakness in domestic demand persists. Frank Konrad, Chairman of the VDMA (German Engineering Federation), succinctly summarizes the situation: “Uncertain customers are hesitant to invest. The German economy needs better framework conditions for a solid growth path.” This statement underscores the need for a comprehensive approach that strengthens not only the robotics industry itself, but the entire economic ecosystem in Europe.

Another critical factor is the increasing regulatory burden and a stagnation in innovation, which is hindering the agility and competitiveness of European companies. Dr. Dietmar Ley, Chairman of VDMA Robotics + Automation, criticizes the "excessive regulation" and high operating costs that burden companies in Europe. While Chinese competitors receive massive state subsidies and are pushing into the European market with aggressive strategies, European companies face a complex web of bureaucratic hurdles that impede the rapid market launch of new technologies. This regulatory frenzy extends across various areas, from environmental regulations and data protection laws to complex approval processes for new production facilities.

At the same time, the VDMA also urges self-criticism within its own ranks. It criticizes a lack of willingness among member companies to shorten innovation cycles and implement customer-specific solutions more quickly. In an era of ever-accelerating market and technological change, agility and responsiveness are crucial. European companies must optimize their internal processes, respond more quickly to customer needs, and invest more boldly in new technologies to remain competitive globally. The oft-cited German engineering expertise and precision must be combined with a greater degree of entrepreneurial daring and a passion for innovation.

Global competitive landscape: China and the USA as new power centers of automation

To fully understand the challenges facing the European robotics industry, it is essential to examine the global competitive landscape. In particular, China and the United States have emerged as the dominant players in robotics and automation in recent years, increasingly putting pressure on Europe.

China's robotics offensive: One state, one vision, one industry conquers the world

In recent years, China has launched an unprecedented robotics offensive, massively accelerated by the government's 14th Five-Year Plan. This plan prioritizes the promotion of high-tech clusters and the development of AI-based manufacturing. The results of this strategic focus are impressive: Between 2019 and 2023, China's robot density in the manufacturing sector more than doubled, from 235 to 470 robots per 10,000 workers. This puts China far ahead of the EU average (219 units), and the country is aiming for an even higher robot density.

Dr. Ley warns emphatically: “China demonstrates how ideas can be consistently translated into industrial mass production. Europe will fall behind if we don't take countermeasures.” This statement gets to the heart of the matter. China is impressively successful not only in developing innovations but also in implementing them on a large scale in industry. This is achieved through massive government investment in research and development, targeted support programs for companies, and a consistent industrial policy.

The Chinese government has a clear vision: China is to become the global innovation leader in robotics and automation. To achieve this goal, enormous resources are being mobilized, talent is being fostered, and an innovation-friendly ecosystem is being created. Chinese companies benefit from generous subsidies, a streamlined regulatory environment, and a vast domestic market that serves as a testing ground and springboard for global expansion.

American industrial policy: “America First” and the return of protectionism

The United States has also realigned its industrial policy in recent years, increasingly relying on protectionist measures and massive government subsidy programs to strengthen domestic industry. The "America First" agenda, which began under the previous US administration and continues under the current one, aims to favor American companies and suppress foreign competition.

A key instrument of this policy is the "CHIPS and Science Act," a multi-billion dollar funding program that specifically directs investments to the semiconductor industry and other key technologies in the USA. This law creates significant competitive advantages for American companies while simultaneously disadvantaging European competitors, who do not benefit from government support to the same extent.

Furthermore, the US is increasingly relying on trade restrictions and tariffs to keep foreign products out of the American market and boost demand for domestic products. These protectionist measures intensify global competition and put additional pressure on European companies.

In response to trade conflicts with the US, Chinese robotics and automation technology manufacturers, such as Siasun and Estun, have intensified their strategic efforts to penetrate the European market. They are building local service structures, investing in sales networks, and offering competitive products and solutions. This development demonstrates that Europe must compete not only with the US, but also with an increasingly assertive and innovative China.

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The VDMA Action Plan: Four pillars for Europe's technological sovereignty

In light of the challenges described and the increasingly competitive global landscape, the VDMA has developed a comprehensive "Robotics Action Plan for Europe". This plan is based on four key pillars aimed at securing Europe's technological sovereignty in robotics and automation and sustainably strengthening the competitiveness of European industry.

1. European Robotics Initiative: Securing independence, strengthening competitiveness

The first pillar of the action plan calls for a "targeted robotics offensive" that combines competitiveness, demographic resilience, and climate neutrality. At its core, it aims to create a unified regulatory framework in Europe that facilitates cross-border cooperation and prioritizes the development and application of key technologies such as collaborative robots (cobots).

A unified European legal framework would make it easier for companies to offer their products and solutions in all EU member states without having to deal with differing national regulations and standards. This would reduce bureaucracy, lower costs, and accelerate the market launch of new technologies.

Prioritizing key technologies like cobots is crucial, as these robots will play a pivotal role in future industries. Cobots are collaborative robots that can work safely alongside humans, opening up new automation opportunities in areas where traditional industrial robots cannot be used due to safety concerns. Promoting cobots would enable European companies to develop innovative automation solutions and strengthen their competitiveness across various sectors.

2. Venture capital mobilization for start-ups: Promoting innovation, enabling growth

European robotics and automation startups face a significant disadvantage compared to their American and Chinese counterparts when it comes to accessing venture capital. Only about 12% of global venture capital flows into European startups, while the majority is invested in the US and Asia. This lack of capital hinders the growth and development of innovative young companies in Europe and thus jeopardizes the future innovative capacity of the European robotics industry.

The VDMA therefore proposes a comprehensive reform of the institutional investment market, modeled on the French Tibi initiative. This initiative combines tax incentives with government co-investments to encourage institutional investors to invest more in young technology companies. A similar initiative at the European level could significantly increase the flow of capital into European robotics startups, thus securing them the necessary resources for growth and expansion.

In addition to tax incentives and government co-investments, other measures could be taken to improve access to venture capital for European startups. These include, for example, the creation of a European umbrella fund for venture capital, the simplification of support programs for startups, and the promotion of business angels and venture capitalists specializing in robotics and automation.

3. Technology roadmaps through benchmarking: Creating knowledge, measuring progress

To accelerate technological progress in robotics and automation in Europe and maintain its position at the global forefront, the VDMA calls for the development of detailed technology roadmaps through systematic benchmarking. This includes a regular and comprehensive comparison of robotics and AI developments in Asia and North America with the European situation.

The plan includes annual progress reports that systematically identify gaps in key areas such as sensor fusion, edge computing, artificial intelligence in robotics, and other relevant technology fields. These reports will not only analyze the status quo but also derive concrete funding measures to close the identified gaps and specifically strengthen European research and development in the relevant areas.

Benchmarking should not be limited to technological aspects but should also consider economic and regulatory frameworks. It is important to understand which factors have led to success in other regions of the world and how these insights can be applied to the European context. Through a continuous learning process and the exchange of best practices, Europe can improve its innovation ecosystems and sustainably strengthen its competitiveness in robotics and automation.

4. Scaling research results: Bringing innovations into application

Europe boasts an excellent research infrastructure in robotics and automation, with renowned research institutions such as the German Research Center for Artificial Intelligence (DFKI) and the Fraunhofer Institute for Manufacturing Engineering and Automation IPA. Despite these strengths, however, Europe does not always succeed in translating its excellent research results into marketable products and services. A gap exists between research and application that needs to be bridged.

The VDMA is therefore calling for the establishment of "real-world laboratories" with simplified approval procedures to test pilot projects and innovative technologies under real-world conditions and scale them up more quickly. Real-world laboratories are test environments where companies and research institutions can test new technologies and business models in a real-world setting without having to deal with the usual bureaucratic hurdles and approval processes.

Examples of such pilot projects could include autonomous logistics systems, AI-controlled production facilities, or innovative robotics applications in agriculture or healthcare. By creating real-world laboratories, Europe would foster a more innovation-friendly environment where new technologies can be implemented more quickly and contribute to strengthening the competitiveness of European industry.

Political fields of action and corporate responsibility: Shaping the future together

The VDMA action plan is aimed not only at policymakers, but also at the companies in the robotics and automation industry themselves. A joint effort from both policymakers and industry is needed to overcome the challenges and put Europe back at the forefront of global competition.

Reform is needed at both national and EU levels: policymakers have a responsibility

The VDMA identifies three key demands on policymakers that must be implemented at national and EU level to improve the framework conditions for the robotics and automation industry in Europe:

1. Debureaucratization: The VDMA calls for a 30% reduction in regulatory burdens for small and medium-sized enterprises (SMEs) by 2026. Reducing bureaucracy is a key lever for easing the burden on businesses, lowering costs, and accelerating innovation processes. This requires a comprehensive review and simplification of laws, regulations, and approval procedures at all levels.
2. Cost reduction: High energy costs in Europe, in particular, are placing a significant burden on the energy-intensive robotics and automation industry. The VDMA (German Engineering Federation) is therefore calling for a reduction in electricity prices for industrial customers to below 10 ct/kWh through targeted subsidies. Competitive energy prices are essential to lower production costs and strengthen European companies in global competition.
3. Research funding: To sustainably strengthen the innovative capacity of the European robotics industry, the VDMA is calling for a doubling of public funding for AI-based robotics to €500 million per year by 2027. Increased research funding is necessary to advance basic research, develop new technologies, and improve knowledge transfer between research institutions and companies.

Corporate strategies in the age of agility: Taking on entrepreneurial responsibility

Dr. Ley appeals to the industry to take action itself and initiate the necessary changes: “The priority is to accelerate innovation. We need to review cost structures and develop customer-centric solutions.” Companies must optimize their internal processes, shorten innovation cycles, and respond more flexibly to customer needs.

Success stories like the modularization strategy of robot manufacturer KUKA demonstrate how standardization and modular design can significantly reduce time-to-market. KUKA has developed near-series plug-and-play systems that enable customers to implement automation solutions faster and more easily. This modularization has reduced time-to-market by up to 40%.

Besides modularization and standardization, other corporate strategies are also crucial for success in the age of agility. These include, for example:

Focus on customer-centric solutions

Companies need to better align their products and services with the individual needs of their customers and offer tailored solutions.

Investments in digital technologies

The digitization of the value chain, the use of artificial intelligence and the use of data are crucial to increasing efficiency, reducing costs and developing new business models.

Building partnerships and networks

Collaborations with other companies, research institutions and start-ups can facilitate access to new technologies, markets and resources.

Promoting entrepreneurship and a culture of innovation

Companies must foster a culture of innovation and entrepreneurship that encourages employees to develop and implement new ideas.

Qualification and further training of employees

In a rapidly changing working world, the continuous qualification and further training of employees is crucial to meet the demand for skilled workers and to secure the company's innovative strength.

Roadmap for regaining competitiveness: Short-, medium- and long-term measures

To sustainably strengthen the competitiveness of the European robotics and automation industry, a comprehensive package of measures is needed, encompassing short-, medium- and long-term goals and actions.

Short-term measures (2025–2026): Setting rapid, effective impulses

Introduction of a European robotics quality label

A Europe-wide quality label for robotics and automation products would highlight the quality and reliability of European solutions and strengthen customer confidence. This could increase demand for European products both domestically and internationally.

Establishment of 20 cross-industry test centers for AI-driven automation

Establishing test centers would offer companies the opportunity to test and further develop AI-driven automation solutions in real-world environments. This would accelerate the market launch of new technologies and strengthen the industry's innovative capacity. The test centers should be cross-industry to promote knowledge transfer and synergy effects between different sectors.

Tax exemption for venture capitalists in deep-tech start-ups

Tax relief for venture capital investments in deep-tech startups would increase the flow of capital into young technology companies and promote their growth and development. This would be an important step towards securing the long-term innovative strength of the European robotics industry.

Medium-term goals (2027–2030): Creating sustainable structures

Increase in robot density in the EU to 350 units/10,000 workers (+60%)

A significant increase in robot density is necessary to improve the productivity and competitiveness of European industry and to maintain its position among the global leaders. This goal requires targeted funding programs and incentives for companies to invest in automation technology.

Establishment of a pan-European robotics cluster with a focus on Central and Eastern Europe

The creation of a pan-European robotics cluster would foster collaboration and knowledge exchange between companies, research institutions, and startups across Europe. Focusing on Central and Eastern Europe could help unlock the innovation potential of these regions and strengthen the European robotics industry as a whole.

Implementation of the “KIRO 2024” recommendations for AI-based automation

The “KIRO 2024” recommendations (Artificial Intelligence and Robotics 2024) contain detailed recommendations for promoting AI-based automation in Europe. Their consistent implementation is crucial to putting Europe at the forefront of AI and robotics.

Europe at a crossroads: Setting the course for the future

The VDMA's current sales forecasts are more than just cyclical fluctuations; they are a warning signal indicating a fundamental loss of competitiveness for the European robotics and automation industry. China's strategic investments in high technology and the protectionist industrial policies of the USA require a decisive and coordinated European response that goes beyond isolated national initiatives.

The VDMA's "Robotics Action Plan for Europe" offers a comprehensive framework that combines political decisions with corporate responsibility. It outlines a path for how Europe can secure its technological sovereignty in robotics and automation and regain its competitiveness in the global arena.

The crucial factor will be whether European policymakers and businesses succeed in implementing the outlined measures consistently and promptly. The years 2025 and 2026 will be pivotal. If Europe acts now and sets the right course, it can avert the looming loss of competitiveness and maintain its position as a leading industrial region in the world. Otherwise, Europe risks falling permanently behind in the global technology race, with serious consequences for the economy, prosperity, and social development. The time to act is now.

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