Rhineland-Palatinate moves up a gear in investment attraction

Like many other German regions, Rhineland-Palatinate has attracted foreign investment in the automotive industry as it shifts towards electrification and autonomous vehicles. In January 2020, France-based PSA Group announced plans to invest about €1bn, together with French battery-maker Saft, to construct a battery cell factory at Opel’s production facility in Kaiserslautern, the state’s fifth most populous city.  

PSA Group, which has car brands such as Peugeot, Citroën, Opel and Vauxhall in its portfolio, estimates the project will create 2000 jobs. When announcing the project, Opel chief executive Michael Lohscheller said: “We will build the largest plant for battery cells in Germany in Kaiserslautern. This marks the start of the transition to a future-proof e-mobility site.” 

Innovation mix

With a German Research Centre for Artificial Intelligence (DFKI) facility and the John Deere European Innovation Centre also located in the city of some 100,000 people, Kaiserslautern has a well-established research landscape. In Rheinhessen-Pfalz, a region within the state of Rhineland-Palatinate that includes Kaiserslautern, R&D expenditure in the business sector was 150.7% higher than the European average, according to the Regional Innovation Scoreboard 2019. It ranked 10th overall across Europe in this metric, and ninth for the number of public-private co-authored research publications.

“The R&D institutes work closely together with the industries so we have the high potential to develop [innovations] for the future across the state's major sectors,” says Christoph Völker, director for investment promotion and foreign trade support at the investment and economic development bank of Rhineland-Palatinate, known as ISB. 

In January 2020, Mercedes Benz opened an expanded development and test centre at its largest truck production facility in Wörth, in the south of Rhineland-Palatinate, where it will develop solutions for connected, autonomous and electric driving for trucks.

The research landscape in Rhineland-Palatinate is more business-orientated compared with the rest of Germany, according to Eurostat. In 2015, the share of public expenditure in R&D represented just 16.8%, compared with an average of 31.3% across Germany.

Rhineland-Palatinate has the highest export ratio of any German state, exporting 57.6% of the goods and services it produced in 2018, according to the Federal Statistical Office. The state’s major industries of pharmaceuticals, food and beverages, machinery and chemicals – Ludwigshafen hosts both BASF’s headquarters and the world’s largest integrated chemical facility – contribute to this trend. 

Manufacturing accounted for 35% of gross value added in the state in 2018, according to official regional accounts. Manufacturing FDI projects account for almost half of all the projects announced in the federal state since 2003, with 18 announced in the industrial equipment sector, according to greenfield investment monitor fDi Markets.

FDI boost

Historically, Rhineland-Palatinate has underperformed in attracting FDI relative to the size of its economy and population. fDi Markets ranks the state 13th out of Germany’s 16 federal states for both greenfield projects (118) and investment ($3.7bn) announced since 2003.

However, FDI has picked up in recent years. A record 14 greenfield FDI projects were announced in the state in 2018, and a further 12 projects in 2019, according to the latest fDi Markets data. This compares with an average of seven projects annually between 2003 and 2017.