The automotive industry is in panic mode: Europe's industrial revolution – When dependencies become an existential threat – Image: Xpert.Digital
From just-in-time dream to nightmare: The Achilles heel of EU industry
Strategic autonomy instead of price wars – Europe's opportunity in the crisis
On October 8, 2025, the illusion of European industrial strength collapses. An abrupt halt to deliveries by semiconductor manufacturer Nexperia, triggered by a geopolitical escalation between the US and China, paralyzes the European automotive industry within days. Volkswagen, BMW, and Mercedes-Benz warn of impending factory shutdowns, supply chains break down, and simple, inexpensive items are traded at hundreds of times their original price. The crisis ruthlessly exposes the continent's Achilles' heel: a decades-long, existential dependence on global supply chains and manufacturing in the Far East. The mantra of "just-in-time" efficiency proves itself overnight to be a strategic catastrophe.
Amidst this panic, a voice raises a fundamental critique that gets to the heart of the problem. Jana Tischler of Baier & Michels, a supplier to the Würth Group, sums up the predicament: Europe has weakened itself in a ruinous price war. "They often haggle over every cent and drive prices down to the absolute limit, only to be surprised when, in the end, added value, know-how, and independence are lost," she analyzes. It is an indictment of a short-sighted purchasing policy that has sacrificed long-term resilience for short-term savings.
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But Tischler doesn't stop at diagnosis. Her company is defying the prevailing narrative of deindustrialization and relocation with a powerful gesture: an investment of 20 million euros in a highly innovative new production facility at its German site in Ober-Ramstadt. Instead of shifting production abroad, Baier & Michels is focusing on technological leadership, fair pricing, and collaborative partnerships.
This decision is more than just the construction of a new factory. It is a counter-proposal that raises the crucial question of our time: How can Europe regain its industrial strength? Jana Tischler's example serves as a starting point for an in-depth analysis of the seven decisive levers – from strategic autonomy in key technologies and a departure from pure efficiency logic to a radical reduction of bureaucracy. It is the search for a new balance between global interconnectedness and indispensable sovereignty before others decide Europe's economic fate.
The moment of truth: When an export control paralyzes production
October 8, 2025, will go down in the annals of European industrial history as the day the illusion shattered. On that Wednesday, deliveries from Nexperia, a largely unknown Dutch semiconductor manufacturer, were abruptly halted. What followed was not a gradual decline, but an economic shock comparable to the aftermath of the Fukushima disaster in 2011. Within a few days, wholesalers' warehouses were empty, and semiconductor brokers were selling tiny components, normally costing less than ten cents, for a hundred times the price. Germany's largest automotive supplier, Bosch, reduced production and working hours at its Braga plant in Portugal. Short-time work threatened its Salzgitter site. Honda halved production volumes at its Canadian plants and shut down production lines in Mexico. Volkswagen, BMW, and Mercedes-Benz warned of imminent factory shutdowns.
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The crisis revealed a fundamental vulnerability in the European economic model. Nexperia controls roughly forty percent of the global market for discrete semiconductors—those unassuming diodes, transistors, and protection elements that process signals, regulate voltages, and respond to sensors in electronic control units. These components don't represent cutting-edge technology, nor the nanometer-scale manufacturing of state-of-the-art processors. They are the industrial equivalent of screws and nuts: technically simple, yet absolutely essential. An average car requires hundreds of such components. Without them, even the most sophisticated production line grinds to a halt.
The cause of the supply crisis lies in a geopolitical spiral of escalation. In September 2025, the US Department of Commerce expanded the scope of its Entity List with a new Affiliates Rule. This regulation stipulates that companies controlled by at least 50 percent of listed entities are automatically subject to the same export controls. Nexperia had been acquired in 2019 by the Chinese technology company Wingtech. Wingtech, in turn, had been placed on the Entity List in December 2024 due to alleged risks to US national security. One day after the stricter rule came into effect on September 29, the Dutch government invoked the rarely used procurement law from the Cold War era and took control of Nexperia. The justification given was the need to ensure the continuity and safeguarding of critical technological knowledge on Dutch and European soil.
Beijing's reaction was swift, less than twenty-four hours later. The Chinese Ministry of Commerce imposed sweeping export restrictions on Nexperia products from its Chinese manufacturing sites. Since the vast majority of Nexperia semiconductors are produced in China, this measure hit the global automotive industry hard. According to industry sources, European and North American manufacturers' inventories were only sufficient for a few more weeks. Finding alternative suppliers proved difficult. While other manufacturers of discrete semiconductors do exist, their capacities cannot compensate for the short-term loss of a company with a forty percent market share. Building additional production capacity would take months, a timeframe simply not available to the high-speed, just-in-time production of modern automotive factories.
At the end of October, the situation worsened. Nexperia halted deliveries of wafers, the thin silicon discs used as the starting material for semiconductors, to its assembly and testing plant in Dongguan, China. Interim CEO Stefan Tilger stated in a letter to customers that the local management had failed to meet its payment obligations. Whether this explanation fully reflects the true motives, or whether more complex power struggles between European management and the Chinese owner are at play, remains a matter of speculation. The immediate consequence, however, is clear: the entire supply chain is in danger of collapsing.
European trade associations sounded the alarm. The European Automobile Manufacturers Association emphasized that without these chips, European suppliers could not produce the parts and components that vehicle manufacturers need. They suddenly found themselves in an alarming situation and required swift and pragmatic solutions from all countries involved. Sigrid de Vries, the association's director general, warned that it could take months to find alternative suppliers, while current stocks would only last a few more weeks. John Bozzella, head of the American Alliance for Automotive Innovation, put it even more bluntly: If the supply of automotive chips was not quickly resumed, it would disrupt car production in the United States and many other countries, and have spillover effects on other industries. It was that critical.
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The Architecture of Dependence: How Europe Lost Its Industrial Autonomy
The Nexperia crisis is not an isolated event, but rather symptomatic of structural problems that have developed over decades. Europe now produces only eight to nine percent of the world's microchips. This extreme concentration of semiconductor manufacturing in Asia and North America is the result of deliberate corporate and political decisions made over the past thirty years. While Europe invested in research and development, it systematically outsourced manufacturing. This seemed rational in a world of stable geopolitical conditions and smoothly functioning global supply chains. Production costs in Asia were lower, economies of scale greater, and specialization more efficient.
But this calculation was based on premises that have proven to be deceptive. It assumed that geopolitical stability was a constant. It assumed that trade relations were primarily shaped by economic criteria. It presupposed that critical dependencies did not constitute political leverage. All three assumptions have been fundamentally proven false over the past five years.
The COVID pandemic between 2019 and 2023 demonstrated for the first time the fragility of globally distributed value chains. When China shut down its production facilities in the spring of 2019, supply chains that had grown over decades collapsed. The blockage of the Suez Canal by the container ship Ever Given in March 2021 exposed the extent of the vulnerability of maritime trade routes within days. A good 90 percent of all goods are transported across the world's oceans, mostly in containers. In 2024, global container volume reached 183.2 million TEU, a growth of 6.2 percent compared to the previous year. Three months each exceeded 16 million TEU, a historic record. The Red Sea crisis led to diversions around Africa and increased global demand for TEU miles by 21 percent.
China's dependence on the global economy extends far beyond semiconductors. China dominates the global production and processing of critical raw materials. For rare earth elements, used in key technologies such as smartphones, electric motors, semiconductors, and turbines, China controls more than sixty percent of global production. The situation is even more dramatic in processing: here, China's market share exceeds ninety percent. Although rare earth elements also occur geologically in Brazil, India, and Australia, China has established a near-monopoly through decades of systematic investment in refining capacity. Extraction is costly, environmentally damaging, and requires significant water and energy input. China accepted these costs, thereby creating strategic power positions.
The same pattern emerges with lithium for batteries, cobalt, nickel, and solar cells. This dependency also applies to semiconductors themselves and to batteries. While Europe possesses its own deposits of many of these raw materials, it lacks refining capacity. The ability to transform raw materials into usable industrial goods has been systematically outsourced to Asia. The greatest risk lies in the processing or refining phase, not in the raw material extraction itself.
This constellation gives China considerable geopolitical leverage. When the Dutch government took control of Nexperia in September 2025, Beijing reacted within hours. The message was unequivocal: Whoever prioritizes European interests over Chinese companies will have their industry pay the price. The Chinese Ministry of Commerce stated it explicitly: The Dutch government's improper intervention in internal company affairs had led to the current chaos in global production and supply chains.
Europe reacted with concern, but largely helplessness. EU Commission Vice-President Henna Virkkunen stated after a meeting with Nexperia that it was obvious Europe's supply chain lacked the necessary resilience. Lessons had to be learned from this. Specifically, this meant that stockpiling and diversifying supplies were crucial for resilience. Investments in supply security came at a cost, but the price paid for a lack of resilience was even higher.
This insight is correct, but it comes late. For decades, the just-in-time philosophy was considered the gold standard of efficient production in Europe. Toyota introduced this concept in the 1970s with the aim of reducing storage costs by minimizing inventory and receiving goods only when needed in the production process. In stable environments, just-in-time does indeed reduce waste and increase operational agility. However, it requires precise coordination between suppliers, manufacturers, and freight forwarders. Any disruption in the supply chain leads directly to production delays.
In a fragile world order, this extreme focus on efficiency proves to be an Achilles' heel. A purchasing manager at a German automotive supplier dramatically illustrates just how vulnerable just-in-time systems are: Deliveries from Nexperia were halted overnight, just like Fukushima. Within a few days, wholesalers' chip inventories were empty. Semiconductor brokers are now selling the components at exorbitant prices, sometimes a hundred times the previous price. The situation is very serious. If there is no political solution, the supply chain will completely collapse in November.
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Nearshoring, Friendshoring, Reshoring: Purchasing strategies against dependence on China
The price of efficiency: Why German production suffers from structural disadvantages
In her LinkedIn post, Jana Tischler of Baier & Michels articulates a fundamental critique of the current state of European industrial policy: Europe is economically unable to compete with the Far East. There is often haggling over every cent and prices are driven to the absolute limit, only to be surprised when, in the end, added value, know-how, and independence are lost.
This observation hits a nerve. German industry suffers from a fundamental competitive disadvantage, manifested in its unit labor costs. In 2024, these costs in German industry were 22 percent higher than the average of 27 industrialized nations. Specifically, this means that to produce one unit of output, German companies had to spend roughly one-fifth more on wages and salaries than the international average. Only Latvia, Estonia, and Croatia had higher costs.
German industry remains among the most productive worldwide. Of the twenty-seven countries studied, Germany ranks seventh. Only the United States has higher productivity among the major industrialized nations. However, Germany also has the third-highest labor costs. In the US, labor costs are two percent lower, while productivity is forty-four percent higher than in Germany.
Since 2018, unit labor costs in Germany have grown somewhat less sharply, at 18 percent, compared to 20 percent abroad. However, while gross value added abroad grew by an average of 6 percent, it declined by 3 percent in Germany. Despite below-average price growth, German industrial companies were able to sell fewer products. One reason for this is that many German companies have lost their technological edge, particularly compared to Chinese competitors, and are therefore less able to dictate prices. High location costs thus become a disadvantage.
Christoph Schröder from the German Economic Institute (IW) warns starkly: The shortage of skilled workers is driving wages even higher, and costs in Germany are expected to continue rising in the coming years. The federal government is called upon to curb the increase in non-wage labor costs while simultaneously addressing demographic challenges. Without a reform of the social security system, Germany will gradually slide into deindustrialization.
In addition to high labor costs, Germany faces a second major competitive disadvantage: excessive bureaucracy. The burden of red tape cost the German economy approximately 67.5 billion euros in 2024. This corresponds to roughly 1.5 percent of its economic output. Together with high energy prices and a dwindling pool of skilled and unskilled workers, this significantly undermines Germany's attractiveness as a business location.
Small and medium-sized industrial enterprises (SMEs) in particular suffer from the multitude of government regulations, as they often lack the resources to meet complex requirements. Unnecessary bureaucracy costs time and money, stifles innovation, and exacerbates their competitive disadvantage. A survey of senior managers in Europe and the USA revealed that 31 percent of company representatives responsible for Germany stated that they are actively relocating or expanding production to other continents. A further 42 percent are investing in other European countries instead of Germany or are postponing investments in Germany for the time being.
The energy-intensive industries of basic chemicals, steel, glass, and cement are being hit particularly hard. Christof Günther, Managing Director of the chemical site operator Infraleuna, observes: Many companies have been unable to fully utilize their plants for years and now see no future. Currently, Germany is losing massive and irretrievable industrial value creation every week.
In this context, Tischler's reference to Baier & Michels takes on particular significance. The company, a subsidiary of the Würth Group, produces fastening technology as well as closure and sealing systems for the automotive, electrical, and medical industries. Despite the challenging economic climate, Baier & Michels is investing twenty million euros in a new production facility at its German site in Ober-Ramstadt near Darmstadt. The innovative b&m-ECCO TEC manufacturing process is scheduled to be implemented there starting this fall.
This process combines the design possibilities of machining with the advantages of cold forming. A 125-ton machine, about the size of a three-room apartment, will produce small functional components such as ball studs, drive shafts, or adjusting spindles without the use of cutting tools. High cycle rates and complete utilization of the raw material, combined with absolute contour freedom and excellent surface quality, are the advantages. Classic long-turned parts, which were previously manufactured exclusively by machining, can now be produced by cold forming with high precision, extremely fast cycle times, and resource efficiency, without generating a single chip as waste.
Baier & Michels' strategic direction is compelling: While they operate eight locations worldwide, their most innovative development is currently taking place in Germany. They are investing around twenty million euros at their Ober-Ramstadt site near Darmstadt, thus bucking the trend of relocating production abroad. They are convinced that this is the right approach.
This stance represents a counterpoint to the prevailing narrative of Germany's competitive disadvantage. It is based on the conviction that successful production is possible in Germany if one thinks differently, calculates fairly, and focuses on quality and partnership rather than price pressure.
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The seven levers for regaining industrial strength: A systematic analysis
The seven levers for regaining industrial strength: A systematic analysis – Image: Xpert.Digital
The question of where the greatest levers for regaining Europe's industrial strength lie cannot be answered with a single cause. Rather, a coordinated package of measures is needed that addresses structural weaknesses while simultaneously building on existing strengths. Based on the analysis of the Nexperia crisis, the findings on pre-buffer stockpiles, and current research on supply chain resilience, seven key levers can be identified.
First lever: Strategic autonomy in critical technologies through targeted industrial policy
The most fundamental lesson from the Nexperia crisis is this: dependencies in critical technology sectors are unacceptable strategic vulnerabilities. Europe must regain the ability to be self-sufficient in defined key areas. This does not mean complete autarky, but rather reaching critical thresholds beyond which attempts at blackmail become futile.
The European Chip Law, adopted in 2023, represents a first step in this direction. It mobilizes 43 billion euros in public and private investment with the aim of increasing Europe's market share in global semiconductor production from the current 9 percent to 20 percent by 2030. The Chips for Europe initiative is intended to support the large-scale development of technological capacities and innovations. A framework to promote public and private investment in production facilities is designed to ensure security of supply.
Initial successes are becoming apparent. Taiwanese global market leader TSMC, together with Bosch, Infineon, and NXP, is building its first European production facility in Dresden. STMicroelectronics and GlobalFoundries are planning a new factory in France. According to estimates by analysts and industry organizations, these multi-billion-euro investments will prevent the current market share of just under ten percent from declining further.
However, contrary to the hopes of the European Union, it is unlikely to rise before the end of the decade. International competition clearly shows that Europe has less financial clout than the United States and Asia. The US CHIPS Act provides 53 billion dollars in direct subsidies, 75 billion in loans, and other tax breaks. The United States also leads in key areas such as chip design and artificial intelligence research. Since 2014, China has supported its semiconductor industry with a state investment fund totaling 70 billion euros to reduce its dependence on the United States. Taiwan, Korea, and Japan subsidize their local industries with similar multi-billion-dollar programs.
EU member states are already calling for a revision of the Chips Act. The Semicon Coalition is demanding a European Chips Act 2.0, which would more decisively support chip design, manufacturing capacity, and research and development investments. Such demands reflect a fundamental shift in thinking: the industry no longer views resilience solely as a matter of supply chain logistics or market share, but as an area requiring public investment, industrial policy, and a long-term strategic direction.
The entire value chain must be considered critically. Europe has strengths in the semiconductor design and manufacturing stages, particularly in power semiconductors, microcontrollers, and sensors. However, weaknesses exist in highly integrated logic chips, memory, and especially in upstream links in the supply chain such as raw materials, manufacturing equipment, and design tools. A comprehensive strategy must address this entire chain.
In addition to semiconductors, other critical sectors must be identified. These include permanent magnets and their precursors, especially for wind turbines and electromobility; lithium-ion batteries for electromobility with their complete supply chain; the photovoltaic industry, particularly ingots, wafers, solar glass, cells, and modules; and the development of a leading market for green steel. In the short term, resilience should be increased through targeted investments in domestic transformation industries and by attracting particularly critical parts of the supply chains to Germany and Europe.
Second lever: Transformation from just-in-time to hybrid resilience models with intelligent buffer systems
The concept of a pre-buffer warehouse, as described in the research on container high-bay warehouses, represents an innovative answer to the dilemma between efficiency and resilience. For decades, the dichotomy between these two goals was considered insurmountable. Either one optimizes costs through minimal inventory, or one increases security of supply through extensive stockpiling. Container pre-buffer warehouses resolve this apparent contradiction through technological innovation.
The idea is based on transferring proven high-bay racking technology from the steel industry to port logistics. A German machinery and plant manufacturer with 150 years of experience in the metal industry originally developed systems for the automated handling of steel coils weighing up to 40 tons in racks up to 50 meters high. This technology was adapted for container handling. After successful tests with over 63,000 container movements at a terminal in the Port of Jebel Ali in Dubai, the system was ready for market.
While conventional container yards stack containers directly on top of each other in a maximum of six levels, requiring restacking in 30 to 60 percent of all container movements, high-bay racking technology enables vertical stacking of up to 11 or even 18 levels with direct access to each individual container. Each container is assigned its own racking space in a steel structure, served by fully automated electric storage and retrieval machines. The system triples handling capacity while simultaneously reducing the required floor space by 70 percent.
The economic implications are considerable. In port areas, where buildable land costs between two and three thousand euros per square meter, saving three hectares of land for just three thousand TEU of storage capacity results in a cost advantage of sixty to ninety million euros. This capital efficiency allows companies to increase their security of supply without disproportionately increasing their financial burden.
The container pre-buffer warehouse is positioned as the first storage station before the actual production warehouse. Production parts from overseas are transported unopened by container to the company premises via road and placed in the pre-buffer zone. Only when needed are the parts transferred from the container to the staging area. This pre-buffer provides an additional layer of security, buffering material in containers as short-term stock to ensure a continuous supply for production. Fluctuations in material supply or slower production steps in the lead-up phase can compensate for delays in the overall process.
A well-designed container buffer warehouse significantly improves all four key metrics of supply chain resilience. Time to awareness, the time it takes to recognize a disruption, is reduced through automated inventory management with real-time reporting. Time to action, the time it takes to initiate countermeasures, is reduced through the immediate availability of materials. Time to recover, the time it takes to restore full operational capability, is accelerated by decoupling from global supply chain dependencies. Time to survive, the maximum time a company can withstand without supplies, is significantly extended by the increased safety stock.
Modern companies often rely on a combination of just-in-time for standard components and just-in-case for sensitive or critical materials. This hybrid strategy combines efficiency and security of supply. Critical components or materials that are difficult to plan for are stockpiled using a just-in-case model, while the just-in-time principle is applied to standardized, readily available products. This allows risks to be minimized without losing sight of cost control.
According to an ifo study, approximately 23 percent of companies are increasing their inventory levels. Small and medium-sized enterprises (SMEs) in particular are focusing on expanding their stockpiles, as diversifying their supplier relationships is often difficult for them. A large proportion of critical intermediate products originate in China. If these are unavailable or arrive late, production, and consequently the entire supply chain, can collapse. Increased storage of these products is intended to ensure greater security in the future, representing a clear trend away from just-in-time production and towards just-in-case production.
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Third lever: Diversification and regionalization of supply chains through nearshoring and strategic partnerships
The extreme concentration of value chains in certain regions, particularly in China, has proven to be a strategic vulnerability. Diversification is therefore no longer an optional risk management strategy, but a matter of survival for European industry.
Nearshoring, the relocation of production to nearby countries, is gaining significant importance. Nearshoring investments increased by 62 percent in 2022 and 2023 compared to 2018-1919. Average investment spending per project tripled compared to 2019, reaching $131 million.
Nearshoring reduces lead times, improves responsiveness, and often brings with it similar cultural and temporal compatibilities. For example, a German company might opt for a nearshore branch in Poland instead of relocating production back to Germany to reconcile lower labor costs with geographical proximity.
Prominent examples illustrate this dynamic. The German car manufacturer BMW has shifted its production to countries like Hungary and the Czech Republic. In this way, BMW benefits from lower labor costs while remaining close to its key markets. The company has invested more than two billion euros in its plant in Debrecen, Hungary. Bosch, a leading global provider of technology and services, has also relocated part of its production to Hungary and Slovakia.
According to an ABB study from 2022, 86 percent of German and 74 percent of European companies are planning reshoring or nearshoring measures. The automotive industry is a particular focus. A Porsche Consulting study reveals sector-specific tendencies toward reshoring. Automotive suppliers show a strong tendency to move closer to OEMs for reasons of efficiency or sustainability.
In addition to geographical diversification, supplier diversification is also crucial. Companies should ensure their suppliers are diversified. Given the potential for unforeseen political or weather-related changes, these suppliers should be geographically spread as much as possible. This reduces dependencies and compensates for the effects of external fluctuations and disruptions.
Friendshoring, the restriction of international trade to countries with which one shares common political values, is also gaining importance. At the Berlin Global Dialogue, EU Commission President Ursula von der Leyen announced a comprehensive plan to significantly reduce dependence on China, modeled on energy policy following the Russian gas halt. The goal is to ensure short-, medium-, and long-term access to alternative sources of critical raw materials for European industries.
In parallel, the EU intends to establish targeted partnerships with countries such as Ukraine, Australia, Canada, Kazakhstan, Chile, and Greenland. Taiwan's de facto ambassador to Germany stated that von der Leyen's focus on de-risking China was the right approach. Many Taiwanese companies are now investing in Southeast Asia instead of China.
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Accelerating bureaucracy reduction: One-stop shops as a location advantage – buffer stocks make supply chains more resilient and efficient.
Fourth lever: Digitalization and Industry 4.0 to increase transparency and adaptability
Digitalization is not an end in itself, but a fundamental enabler for resilient and efficient production. The integration of the Internet of Things, big data analytics, artificial intelligence, and digital twins transforms supply chains from reactive to proactive systems.
According to a study by PwC and Strategy&, German industrial companies plan to invest heavily in digital applications over the next five years. On average, they intend to allocate approximately 3.3 percent of their annual revenue to Industry 4.0 solutions. This equates to an annual investment of more than 40 billion euros. As early as 2020, over 80 percent of the surveyed industrial companies aimed to have digitized their value chain.
Companies expect the digitalization of their value chains to lead to more efficient processes and significant cost savings. On average, the surveyed firms anticipate an efficiency increase of 3.3 percent per year. At the same time, digital solutions are expected to help reduce costs by 2.6 percent annually.
Companies that have already largely digitized their product and service offerings have experienced above-average growth over the past three years. Nearly seventy percent of all companies with highly digitized products achieved growth of between six and ten percent in the last three years. The study calculates that German industry can generate an additional thirty billion euros annually thanks to digital products and services.
Visibility is crucial for supply chain resilience. Maintaining an overview of all relevant processes allows for rapid response to problems, preserves control, and enables proactive planning. Digital platforms that allow for real-time monitoring offer greater transparency and flexibility. Reliable communication is essential for this, made possible by digital tools such as specialized SCM software.
The Internet of Things plays a central role in Logistics 4.0. Sensors and smart devices continuously collect data that can be used to optimize logistics processes. This ranges from monitoring warehouse conditions to optimizing routes in transport logistics. In the context of container pre-buffer warehouses, this means integrating RFID tracking systems that monitor inventory in real time and smart contracts via blockchain technology that ensure suppliers deliver materials only when production requires them.
Big data analytics and artificial intelligence leverage the flood of data generated by IoT devices and other sources. Algorithms can be used to identify patterns, optimize processes, and make informed decisions in real time. Predictive analytics will transform the role of buffer stocks. Instead of reacting to material shortages, intelligent systems will anticipate demand fluctuations and proactively adjust inventory levels. Research shows that AI-powered demand forecasting in just-in-time (JIT) environments can reduce inventory costs by 20 to 30 percent while simultaneously improving order fulfillment rates.
The integration of digital twin technology enables real-time monitoring and simulation of warehouse operations before physical changes are implemented. By 2035, the market for automated container terminals is expected to reach 20.3 billion US dollars, driven by advances in robotics, autonomous vehicles, and AI-powered logistics systems.
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Fifth lever: Radical reduction of bureaucracy and acceleration of approval processes
Bureaucracy is one of the most frequently cited negative factors for Germany and Europe as business locations. In 2024, the burden of bureaucracy cost the German economy approximately 67.5 billion euros, roughly 1.5 percent of its economic output. This significantly reduces productivity.
A second aspect is speed. Even if the bureaucratic effort is low, a process can still be very time-consuming, for example, if independent process steps are not implemented simultaneously but sequentially. This means that companies may have to delay the commissioning of production facilities, have sales processes launched later, or not even begin innovation projects.
Thirdly, bureaucratic processes usually involve a degree of discretion. Rules can be interpreted in such a way as to eliminate any potential risk through regulations. Conversely, the administration can also assess risks and, based on the probability of occurrence, decide which regulations are actually necessary to ensure safe operation. The latter generally allows for greater economic activity.
For the establishment of production facilities, practical studies have shown that centralized one-stop shops for all related processes can be particularly successful. These studies are also ideally suited to harmonizing regulations at the federal, state, and EU levels and to eliminating duplicate regulations.
A third focus should be placed on the cost side of implementing sensible regulations. Fully electronic workflows and a nationwide platform for notifications and approvals should replace analog processes. Comparable regulatory quality can also be achieved with different approaches. Risk-based approaches, which rely on weighing probabilities, offer a promising opportunity.
The aim is not to abolish bureaucracy, but rather to modernize it, make it cost-effective, and enable rapid implementation. A functioning state with a streamlined bureaucracy then becomes a genuine competitive advantage. German businesses expect the new federal government to implement drastic cuts in bureaucracy, along with greater speed and efficiency.
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Sixth lever: Focus on quality, innovation and partnership instead of pure price competition
Jana Tischler's key message deserves special attention: Baier & Michels demonstrates that successful production is possible in Germany if one thinks differently, calculates fairly, and focuses on quality and partnership instead of price pressure.
This stance contradicts a widespread purchasing practice that focuses primarily on cost minimization. When companies make the lowest price the sole criterion for every procurement decision, they create incentives that lead to the erosion of added value in the long run. Suppliers constantly under price pressure have no room to invest in quality, innovation, or resilience. They are forced to cut costs wherever possible, if necessary by relocating production to low-wage countries or by compromising on quality.
The alternative model is based on long-term partnerships, fair pricing, and the understanding that quality and security of supply come at a price. A strong reputation for high quality can give a brand a competitive advantage, allowing it to command higher prices. Customers are often willing to pay a premium for products they perceive as high-quality, which enables companies to improve their profit margins.
Consistent product quality increases customer loyalty and retention, leading to higher sales and repeat business. It can also improve brand reputation, attract more customers, and increase the company's market share. Quality control measures play a crucial role in improving a company's financial performance.
Made in Germany, the quality of German products, and German engineering expertise were legendary. This mastery, based on product quality and reliability, brought growth to companies, secured jobs for people, generated tax revenue, and provided society with the foundations for decades of prosperity in well-being and peace. Many German companies, especially those in the globally exceptionally strong and innovative Mittelstand (SMEs), have continued to work hard to achieve quality leadership in their markets.
Investing in quality control measures, such as regular inspections and rigorous testing, can ensure that products consistently meet high standards. Furthermore, it allows companies to identify and resolve problems early, reducing the risk of product recalls or dissatisfied customers. Quality control can pave the way for continuous improvement. It provides valuable insights into the production process and enables companies to make data-driven decisions to improve their operations and product offerings.
Seventh lever: Massive increase in research and development investments with a focus on transfer into value creation
Europe invests too little in research and development compared to other countries. At 2.1 percent of its gross domestic product in 2021, Europe lags significantly behind the United States (3.5 percent), China (2.4 percent), Israel (5.6 percent), South Korea (4.9 percent), and Japan (3.5 percent).
A clear commitment from the EU and its member states is needed to invest massively in research, particularly in future and key technologies, in order to achieve a sustainable, resilient, and competitive European Research Area. The coming years are crucial to avoid falling behind countries that compete with billions in subsidies and attractive location conditions.
Companies account for two-thirds of all research expenditure in Europe. Support through public research and development funding proves to be a key lever for the entire research ecosystem, providing incentives for inter-company collaborations in the pre-competitive framework and for close integration with academia and small and medium-sized enterprises (SMEs). German research-intensive companies are leaders in their investments compared to their European counterparts. In 2022, German companies accounted for 46.4 percent of total industrial research expenditure in the EU.
At the same time, Europe is comparatively weak when it comes to transferring research into value creation. The interface between publicly funded research and marketable production and scaling – in other words, the transfer process – urgently needs to be boosted in Germany and Europe. The central focus must be on integrating research projects into broader industrial application practice.
Accompanying industrial policy measures are necessary to safeguard the international competitiveness of industry, which often faces immense challenges during the transformation process. Ultimately, the goal is to bring research results to market maturity. Therefore, the entire development chain must be included and linked in the future, from the initial idea or discovery to the market readiness of the finished product and the development of standards.
Especially in key digital technologies like artificial intelligence and the digital data economy, the USA and China are setting a different pace. Furthermore, there is a lack of disruptive innovations. German companies are good at optimizing existing processes. However, innovations that revolutionize entire business models and value chains rarely originate in Germany.
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The dialectic of efficiency and resilience: Why Europe needs both
The Nexperia crisis has brutally revealed that the European economic model is at a critical turning point. Decades of one-sided optimization for cost efficiency have created dependencies that are now proving to be strategic vulnerabilities. The answer, however, cannot be to swing the pendulum in the opposite direction and define autarky as the goal. Rather, it is about finding a new balance between the advantages of global division of labor and the necessity of strategic autonomy in critical areas.
The seven identified levers do not constitute a sequential program, but rather a systemic bundle of measures that can only achieve the desired effect when considered together. Strategic autonomy in critical technologies without a simultaneous transformation of inventory management logic remains incomplete. Nearshoring without digitalization forfeits efficiency potential. Reducing bureaucracy without a focus on quality and innovation leads to a race to the bottom. Research investments without transfer into value creation are wasted.
Jana Tischler's question about where the greatest levers for regaining Europe's industrial strength lie cannot be answered with a single, one-dimensional solution. The greatest levers lie in the intelligent combination of all seven dimensions, in the ability to productively resolve apparent contradictions, and in drawing strength from the crisis for a fundamental realignment.
Europe must rediscover its self-belief, as Tischler puts it, and act before others decide for it. This belief, however, cannot be based on a nostalgic glorification of past strengths, but must be grounded in a sober analysis of current weaknesses and a resolute vision of future possibilities. The tools are there, the technologies are available, the knowledge exists. What is lacking is the political will to mobilize the necessary resources and implement the required structural changes, even in the face of resistance.
Baier & Michels' investment in a state-of-the-art production facility in Germany demonstrates that it is possible to produce successfully and innovatively even under the challenging conditions of the German market. Crucial to this success is the courage to think differently, to use fair pricing, and to prioritize quality and partnership over pure price competition. If many companies follow this example, if policymakers create the right framework, and if society supports the necessary transformation processes, then Europe certainly has the potential to regain its industrial strength.
The Nexperia crisis should not be seen as an isolated incident, but as a wake-up call. It demonstrates with alarming clarity where extreme dependencies can lead. It also shows which levers must be activated to prevent such crises in the future, or at least to manage them more effectively. Container buffer storage, hybrid warehousing strategies, nearshoring, digitalization, deregulation, a focus on quality, and research investments are not theoretical concepts, but practical solutions that are already being implemented by innovative companies.
The question is not whether Europe can regain its industrial strength, but whether it has the will to take the necessary steps. The answer to Jana Tischler's question is therefore: the greatest leverage lies in the comprehensive transformation of the European industrial model from a one-sided focus on efficiency to a balanced system that equally considers efficiency and resilience, global integration and strategic autonomy, cost optimization and quality leadership. This transformation process requires massive investments, bold decisions, and a willingness to abandon cherished habits. However, it is essential if Europe does not want to become an economic pawn in geopolitical power games, but rather wants to shape its own future.
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