Where Germany can still grow: future markets for domestic companies

Analysis of future markets for companies Where Germany can still grow As of: October 28, 2026 • 6:19 a.m

The German economy has many problems. But despite all the negative news, there are also opportunities. Because in some markets of the future, domestic companies have a good chance.

The German economy has barely gotten off the ground for years. Former guarantors of success are weakening: the automotive industry, mechanical engineering and the chemical industry. In addition, competition from China is growing and traditional export markets are becoming increasingly difficult. But while the weaknesses of Germany as a business location are discussed primarily, the opportunities for new growth are easily lost sight of.

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Germany is better positioned in some future areas than the crisis debate suggests. The management consultancy McKinsey has identified 14 dynamically growing markets in which German companies have good prerequisites: from biotechnology and medical technology to robotics and new materials to climate-friendly energy technologies and quantum computing.

The global market potential of these “growth arenas” will add up to more than $40 trillion by 2040, says Luca Flora from McKinsey in an interview with the ARD financial editorial team.

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In order to take advantage of these opportunities, Christian Rammer from the Leibniz Center for European Economic Research (ZEW) believes that Germany must also rethink its previous successful model: "In the past decades, we have always thought of growth as growth in exports: Where can we produce something here in Germany and then sell it to the world?"

But this strategy is increasingly reaching its limits - this is particularly evident in the automotive industry. In view of growing trade barriers and geopolitical uncertainties, Rammer believes it is not sustainable to produce cars in Germany for the entire global market. Manufacturers increasingly relocated production closer to their sales markets. According to Rammer, Germany must therefore look more closely for new growth opportunities at home and in the European internal market.

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The ZEW economist sees potential where social challenges create new demand: in housing construction, in health and care, in adapting to climate change and in energy and water supply.

However, in the growth debate, Germany focuses too much on factories and industrial production. In his opinion, the service sector offers particularly great opportunities. “Where people work for other people – that is actually the big growth area,” says Rammer.

Already today, a good 71 percent of German gross value creation occurs in the service sector. Nevertheless, compared to other European countries, Germany is still very industrial: in 2025, the manufacturing sector accounted for 22.9 percent of gross value added, compared to the EU average of just 19.1 percent.

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However, some experts see Germany's industrial tradition as an advantage. "Germany has something that Silicon Valley lacks: namely machines, systems, production data - and that goes back decades," says Barbara Engels, expert on sustainable digitalization and artificial intelligence at the German Economic Institute (IW).

German industrial companies have a wealth of data that cannot be found anywhere else in the world. “In my opinion, Made in Germany will continue to exist in the age of AI,” says Engels.

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It is crucial to combine industrial experience and artificial intelligence. What can be particularly successful in so-called “physical AI” is that humanoid robots require precise drives, sensors and complex control technology.

“And it is precisely such components that are very successfully developed, manufactured and sold in Germany by German specialists, often from medium-sized companies,” says McKinsey expert Flora. "That means that as Germany we don't necessarily have to control an entire value chain in order to still participate in the market."

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A KfW study from September shows that AI offers German companies economic opportunities beyond robotics. Medium-sized companies that use AI have, on average, stronger sales growth, higher productivity and better returns.

In general, many companies in this country hardly seem to be exploiting their potential. This emerges from an analysis by the management consultancy McKinsey. Between 2019 and 2023, just 29 of 16,200 companies examined - 0.2 percent - were responsible for 47 percent of the productivity growth in this group of companies. McKinsey expert Jan Krause emphasizes that the crucial dividing line does not run between industries, but rather “between courage and hesitation.”

According to ZEW economist Christian Rammer, one reason for the reluctance of many companies is bureaucracy. Too many regulations, lengthy approval processes - all of this slows down investments, even if the demand is there. As a result, companies run the risk of missing out on important market opportunities. Or as Rammer puts it: "By the time we get through this, the market may already be gone or others were simply faster."

So Germany is not lacking in growth opportunities. The only question that remains is how the conditions can be created to actually use them.

This topic in the program: tagesschau.de | Where Germany can still grow | Oct 27, 2026 | 2:54 p.m