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Growth Markets: German Exports to the Bric Region Growing2013-02-15 source own
With markets in the Euro Region either flat or in decline Companies from Germany are looking further afield for business growth opportunities with the Bric countries a destination of choice for many large as well as small to medium size companies. Large German companies such as Volkswagen and Siemens have led the hunt for business outside of Europe, but now we see a number of small to midsize companies especially those operating in niche markets looking to break away from Europe to find Business in Brazil, Russia, India, China and South Africa.
The trend for German companies unlocking new markets will continue to grow with the rapid economic development and solid capital investment in growth markets such as the Bric Region. If German companies solely relied on the Euro countries for their growth then they will be on a less stable footing and miss the excellent opportunities to develop their business in emerging markets.
German Companies are increasing their exports to the Bric Countries, as exports to the Euro Region decline the Bric countries Brazil, Russia, India and China are increasing their share of German Imports. In 2000 Germany exported 45.5% to the Euro region and 3.9% of the 4 key Bric countries, now in 2012 exports to the Euro Region are 38.1 % a decline of - 7.3% and to the Bric Region 11.7 % which is an increase of 7.8%. It’s predicted by 2020 Germany’s exports to the Euro Zone will be 33.9% and to the Bric Region 24.3%.
The Rapid rise of the Bric countries has seen a global shift of economic power currently the 4 key Bric countries of Brazil, Russia, India and China occupy 4 of the top 10 global positions based on their GDP at market exchange rates. China had the 2nd largest GDP, Brazil 6th, Russia 9th and India 10th based on their GDP in 2011. The projected positions of these Bric countries by 2030 is China 1st, India 3rd, Brazil 5th and Russia 7thh and even further ahead to 2050 it will be China 1st, India 3rd , Brazil 4th and Russia 6th.
With the Bric region's combined GDP is growing at the rate of another Italy each year this is a vast amount when you consider that Italy ranks 8th in the world GDP table with GDP of US$ 2.1 trillion per year, China accounts for about 50% of all combined GDP growth amongst the Bric Partner countries. India is expected to have the greatest projected average GDP growth from now until 2050 at 5.8% each year with China just behind at 5.2%, Brazil 4.1% and Russia 3.9%.
German trade by Countries in the Bric Region.
Brazil is a vast country of 8.547 million square kilometers its ranked 5th in the world for landmass and population, its population is young and growing rapidly. Brazil has abundant natural resources and leads the table for exporting of Iron Ore, Soya, Chicken, Sugar, Coffee to name but a few. In 2011 Brazil established itself as the 2nd most popular destination for FDI (foreign direct investment) and was 5th in terms of total projects.
Currently there are 1400 German companies investing in Brazil who employ a total workforce of 250 000 workers. The majority of German company’s base themselves in the São Paulo region. The total investment by German companies in Brazil in 2011 was € 900 million euros which brings the total investments made by German companies in Brazil to € 18.5 billion euros. Brazil is Germany’s leading destination for investment in Latin America and Germany is currently Brazil’s 4th largest Foreign investor behind the US, UK and Spain.
Germany's export sectors in Brazil are Automobiles and spare parts, Machine Tools and Machinery, Chemicals and Pharmaceutical products. Germany is also a large importer from Brazil of Iron Ore, Soya and Soya products, Coffee, Meat, Aircraft spare parts, machinery, Oil and Copper. Brazil is 20th on the list of leading export destinations for Germany and 21st for Imports.
The Russian market is of rising significance for German business as Russia has the potential to be the largest market in Europe. As of 2012 it’s estimated that there are 6,300 companies from German with investments in Russia with approximately € 40 billion euro of capital invested. German companies have helped create over 120, 000 jobs in Russia. In a recent survey Many Germany companies have expressed their desire to increase their investments in Russia.
German companies are very active with investments in Russia and in fact Germany is only 2nd to Russia's Bric Partner China as the largest invested in Russia, China has been Russia's largest trade partner for the last 2 years. It’s expected that investment in Russia for 2012 will be back up to the record levels that were invested by German companies in 2008.
German companies are showing more confidence in future partnerships within Russia than some of its more traditional markets in the EU. German companies lead the way in terms of market penetration in Russia where's German companies tend to invest in a wide range of Industry's Companies from China tend to just focus on the Energy sector and exploitation of Raw Materials Industries. German companies are investing in the retail industry in Food and Non Food, Energy, Transport, Construction, Automotive, Woodworking and Metalworking, Oil and Gas, Logistics and the agriculture industry are all Industries that are attracting German Investment. German companies are always looking to invest with Russian partners who want to modernise and have products which will not just service the demand in the local market but can also be sold around the world. We also see German financial institutions and Banks looking to invest in Russia and its future.
German retailers such as Aldi and Lidl are looking for acquisitions in Russia and plan to buy Russian assets over the next few years, Other Germany retailers are looking not to just invest in the Food sector but the non-food sector as well. We also see German companies making Greenfield investments in the consumer sector with German companies looking to set up production there.
With Germany not Looking to renew its Nuclear plants when they reach the end of their life so German companies are looking to invest in the Russian Energy and Oil and Gas Industry to secure Germany’s future needs as Germany looks to diversify its Energy mix. German companies RWE and EON are making investments in Russia by investing in Russian Energy suppliers and Russia’s Oil and Gas infrastructure. German giant Siemens is investing $ 1.4 Billion dollars over the next 3 years in Russia, $ 960 million of this investment will be spent in the Energy sector and $ 550 million is going to production facilities to build Gas Turbines and their related services and Support industries. Siemens is also investing in Russia’s transport infrastructure and particularly the Railway industry by joining together in a trade partnership with Russian Partner Company Sinara Group. It’s expected that this Trade Partnership will focus on the production of Cargo and urban commuter trains. To supply these Trains with Drives Siemens will then be building an Industrial Drive production line in St Petersburg to support this.
In 2011 Volkswagen further invested in Russia with a $900 million investment which was the biggest investment then its previous investments since 2006 it makes it the largest automotive investor in Russia and one of the largest overall international investors in Russia.
Russia is Currently Germany’s 12th largest export market and 7th largest country of Imports.
There are currently close to 1300 Germany companies with direct capital investment in India, Amongst Foreign Investors in India Germany ranks 8th with € 2.8 billion euros of investment since 2000. German companies are very positive about the future development of Business in India, in a recent survey by the Indo-German Chamber of Commerce (IGCC) 27% of Germany companies will increase their investments over the next three years, 46% plan a moderate increase and the balance of 28% will keep their investment at a constant level, no companies surveyed indicated that they would decrease their investments.
German companies have activities in a diversified range of industries with top sectors being the Transportation Industry, Mining, Oil and Gas, Chemical, Automobile, Service Sector, Electronics, Construction, Metallurgical industries and trading.
The most popular region for German investment is Maharashtra with areas such as Pune, Karnataka and Gujarat are also increasingly becoming popular amongst German companies.
India is an important Growth market for German companies but equally Germany is important to India as through German companies' investment over 200, 000 jobs have been created.
India is Currently Germany’s 21st largest export market and 25th largest country of Imports
There are over 4000 German Companies with investments in China with 24.4% of companies involved in the Mechanical and Plant Engineering Industry, 13.4% in the Automobile industry and 13.1% in legal and consulting services. Overall 39% of German companies investing in China are working in the Manufacturing sector in China. After Mechanical and Plant Engineering Industry, Automobile industry and legal and consulting services the next strongest sectors for German companies in China other strong market sectors are the Plastics Industry, Building/Construction Industry, Transport/Logistics, Electronics, ICT, Environment/Energy and Chemicals Industry.
China now does more Business with China then France and by 2030 the trade between Germany and China will be double the amount of trade between Germany and France, Germany is China’s largest trade Partner in Europe.
China is Currently Germany’s 5st largest export market and 2ndh largest country of Imports.
To view a past article on Germany China trade click here ‘’ China and Germany and there growing trade’’Disclaimer: This information has been collected through secondary research and BricPartner is not responsible for any errors.
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