If you feel like German industry has been losing its edge, the data just backed you up. Alvarez & Marsal's Competitiveness Index came in at 3, down from 11 for 2025 and 21 for 2024. The scale runs from plus 100 to minus 100, with companies rating how competitive they feel.
This latest reading draws on almost 250 interviews conducted from May through August by Alvarez & Marsal together with the German Society for Management Research. Decision-makers spanned key sectors such as autos, machinery and plant engineering, and chemicals and pharmaceuticals.
Top complaints started with regulation and bureaucracy, with high energy prices close behind. Input costs are a cross-industry sore spot. Executives also frequently flagged the slow pace of government decisions and the lack of concrete moves on energy supply or pricing, and they put more weight on building trade ties.
The pressure shows up on the ground. Big chunks of the economy - autos, chemicals and manufacturing - are restructuring to cut excess capacity, including plant closures and layoffs. Workers at Volkswagen AG, Mercedes-Benz Group AG, BMW AG, Audi, Porsche and major suppliers have taken to the streets to protest.
Areas that appeared comparatively resilient in 2024 - among them machinery and plant engineering, together with chemicals and pharmaceuticals - are now ranked among the underperformers in the latest survey. In pharma specifically, respondents highlighted issues related to research productivity, the quality of pipelines, and regulatory demands.
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"Companies have fully understood that just executing what they can influence might not be good enough to remain competitive," said Patrick Siebert of Alvarez & Marsal, where he serves as a managing director. He added that competitive pressure from China is moving so quickly that some European leaders did not foresee the scale of the impact showing up in full-year 2026 or 2027.
That urgency is pushing strategic moves. According to the report, 56% of firms have shifted production abroad in whole or in part, and 45% have relocated research and development to international hubs. Roughly 80% say speed is a make-or-break factor, noting that global rivals launch earlier and stick to course changes more consistently.
After Covid-19's supply-chain shocks, more companies are hedging with dual sourcing rather than only buying from the lowest bidder. Even so, 90% still rate cost cutting as high or very high priority. As Siebert put it, "Being seen as a trusted supplier provides you with additional orders and clearly more sustainable business development."
Digital tools are creeping in, but they have not rewritten job rosters yet. Just under half of industrial firms are using AI in some form, for example to model value chains or to improve planning and control. "Everyone is aware that AI will make work more efficient, more productive, and everyone is aware that it will also make certain jobs redundant," Siebert said. "However, as of today, I would say that AI hasn't yet replaced certain jobs."
There are glimmers of macro improvement. The country's leading economic institutes have lifted their joint growth outlook for this year to more than twice the earlier forecast, and a widely watched gauge of business confidence is now at its strongest since late 2025.
Cost pressure, the race for speed and shifting production footprints are shaping how German manufacturers operate right now. If you own names with exposure to these sectors, expect strategies around supplier diversification, efficiency drives and targeted AI pilots to feature in the next few quarters.
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