Analysts said the key risk was that companies increasingly viewed current challenges as structural rather than temporary, potentially accelerating a downward cycle of high costs, weak investment and low growth. Progress on energy policy and administrative efficiency, they said, would be critical to stabilizing Germany's industrial base.

BERLIN, Jan. 14 (Xinhua) -- Germany, long regarded as a pillar of economic stability in Europe, is facing mounting pressure on its domestic industrial base. Its leading companies remain profitable overseas, but production relocations and job losses are increasingly weighing on operations at home.

Analysts noted that the divergence between global profits and domestic weakness underscored structural strains in Europe's largest economy and heightened concerns over its long-term industrial competitiveness.

DOMESTIC STRAINS

Germany's DAX 40 index, the country's main stock index, is widely seen as a barometer of economic strength and industrial structure.

A recent report by consultancy Ernst & Young (EY) showed that 23 DAX companies had German subsidiaries that had been loss-making for more than a year. Nine of them had recorded domestic losses for four consecutive years.

At the same time, these companies continued to post solid profits overseas, with some reporting improving global results. Analysts said this pattern of domestic pressure offset by overseas earnings was becoming a defining feature of Germany's large corporations.

EY noted that production, research and sales were no longer anchored to Germany by default. As global value chains evolved, companies increasingly spread activities across borders to reduce costs and diversify risk.

Signs of strain were also visible beyond the listed corporates. The Halle Institute for Economic Research reported that corporate insolvencies in Germany rose to a 20-year high in 2025, with 17,604 cases recorded. Around 170,000 jobs were affected by company failures during the year.

Another EY analysis showed that pre-tax profits of Germany's top 100 companies by revenue fell about 15 percent in the first nine months of 2025. Several key industries recorded particularly sharp declines in overall profitability.

Analysts said that when leading German firms struggled to achieve sustainable profits at home, the effects increasingly spilled beyond capital markets, weighing on employment, investment decisions and supply chain stability.

STRUCTURAL COSTS

Peter Leibinger, president of the Federation of German Industries (BDI), said Germany's industrial output declined for a fourth consecutive year in 2025, citing data released by the industry association. He said the trend reflected structural difficulties and warned that the downturn could accelerate if no effective adjustments are made by companies.

EY said that prolonged losses in domestic operations could force firms to reassess the location of their value chains. Services and research activities could increasingly be shifted abroad if they could not be sustained profitably in Germany.

High energy prices and labour costs were widely cited as key factors eroding competitiveness. The high-cost environment raised the overall expense of long-term technology investment in Germany.

Traditional industrial pillars such as basic materials, automotive and components, and mechanical engineering were increasingly disadvantaged in international markets, analysts said.

Bosch Chairman Stefan Hartung said the company expected profits in 2025 to fall well below expectations and saw little prospect of a near-term recovery. Bosch planned to cut around 22,000 jobs in response to sustained cost pressures.

CAUTIOUS OUTLOOK

Amid ever more apparent industrial risks, economic sentiment in Germany has turned increasingly cautious. A survey by the Munich-based Ifo Institute showed that around a quarter of companies expect business conditions to worsen in 2026.

A survey by the German Chambers of Industry and Commerce (DIHK) found that about one third of the 23,000 companies interviewed planned to cut investment, while a quarter intended to reduce staff.

DIHK Chief Executive Helena Melnikov said Germany was facing deindustrialisation pressure. Since 2019, she said, the industrial sector had lost around 400,000 jobs, and industrial bankruptcies in 2025 reached a multi-year high, reflecting the impact of corporate relocation and industrial contraction.

Without timely policies to lower cost burdens, streamline administrative procedures and improve the investment environment, Germany risked losing both value creation and employment, she said.

Analysts said the key risk was that companies increasingly viewed current challenges as structural rather than temporary, potentially accelerating a downward cycle of high costs, weak investment and low growth. Progress on energy policy and administrative efficiency, they said, would be critical to stabilizing Germany's industrial base.