Localization of German Businesses in Russia

Resulting from mutual sanctions between the European Union and the Russian Federation effective since 2014, road freight from Germany (Russia’s major international partner in the EU) expressed in physical terms reduced by 19.6% in 2015 on the year 2014. According to Russian-German Chamber of Commerce, German exports to Russia in terms of money decreased approximately by 40% (to 21 billion Euro).

Some German businesses left the Russian market, but many of those that stayed continue to develop their presence by adopting industrial localization policy.

According to EY research, 80% of German corporations do not give up their plans for the Russian market and start or continue to expand manufacturing on the territory of Russia. GEA (refrigeration plant), Bionorica (pharmaceutical company), Siemens or Class (manufacturer of agricultural machinery) could be held up as examples.

Rüdiger von Fritsch, Ambassador Extraordinary and Plenipotentiary of the Federal Republic of Germany in the Russian Federation, states that the volume of German investments into Russia in the first six months of 2016 was down 50% against the same period of the previous year. According to Deutsche Bank, direct German investments into Russia in the first nine months of the year 2016 increased up to 2.05 billion Euro.

From this viewpoint, German export partners are gradually changing their structure (replacing finished products by equipment, materials and components) and shifting from the international logistics market to Russian domestic market due to manufacturing localization of businesses in Russia.

Prepared by TELS Marketing Department according to data taken from Moskovskij komsomolets, expert.ru and inosmi.ru