Production in Eastern Europe: when relocation pays off

The pattern is the same in many industries: development, sales and highly automated manufacturing stay in Germany, while the labour-intensive steps move east. Assembly, finishing, cable harnesses, rework — wherever many hands are needed, the hourly rate decides. And in Romania, Bulgaria or Hungary it is a fraction of the German level.

At the same time, companies keep coming back because the numbers did not add up in the end. This article looks at the current figures, the trend and the costs that never appear in a first quote.

The gap in euros

Every year, Eurostat and the German Federal Statistical Office publish labour costs per hour worked. For manufacturing in 2025 the figures are:

• Germany: €49.50
• EU average: €35.00
• Czechia: €20.20
• Poland: €17.10
• Hungary: €15.60
• Romania: €12.00
• Bulgaria: €10.20

An hour of industrial work therefore costs about four times as much in Germany as in Romania. Across the whole economy, Germany stands at €45.00 and Romania at €13.60. The share of non-wage costs is striking: in Romania it is only 4.8%, the lowest in the EU, compared with an EU average of 24.8%.

For comparison in local currency: since 1 July 2026, Romania's statutory minimum wage has been 4,325 lei gross per month, and the average wage in June 2026 was 9,564 lei gross. At a rate of around 5.25 lei to the euro, that corresponds to roughly €825 and €1,820.

The trend: relocation is back on the agenda

Several recent surveys show how seriously German companies are taking the question:

• DIHK Energy Transition Barometer 2026: around 20% of all companies are considering moving investment or capacity abroad. In industry the figure is around 40%, among large industrial companies around 60%. About a third of large industrial firms are already relocating. The main reason is energy costs.
• DIHK survey on foreign investment 2026: 43% of industrial companies plan to invest abroad. For 41%, cost savings are the motive — the highest level since 2003. Of these, 47% intend to cut jobs in Germany.
• KfW Research, September 2026: 29% of internationally active mid-sized manufacturers plan to relocate within the next five years. KfW itself expects that around 7% of industrial mid-sized companies will actually move parts of their production.
• KPMG and the German Eastern Business Association, CEE Business Outlook 2026: 26% of the companies surveyed are considering moving production from Germany to Central and Eastern Europe. Only 4% have concrete plans for the next twelve months. Preferred locations are Poland (56%), Ukraine (43%) and Romania and Czechia (35% each).

The figures show two things: the cost pressure is real and considerable. And there is a long way between thinking about relocation and actually doing it.

Why the gap is narrowing

Low hourly rates are a snapshot. Between 2020 and 2025, labour costs per hour across the economy rose at very different rates:

• Germany: +22%
• Czechia: +36%
• Hungary: +55%
• Romania: +66%
• Poland: +75%
• Bulgaria: +82%

The gap in euros is therefore shrinking year by year. Anyone calculating a relocation with today's wages is working with numbers that will no longer be right in five years. For countries outside the euro area there is also exchange-rate risk.

Productivity as a counterweight

Lower wages come with lower productivity. Per hour worked, adjusted for price levels (EU = 100), Germany stood at 124 in 2025, Czechia at 80, Romania at 76, Hungary at 70, Poland at 68 and Bulgaria at 59. Romania has caught up strongly since 2015, when it stood at 53. The figures cannot be offset directly against labour costs in euros, but they show the direction: part of the wage advantage is lost through lower output per hour.

Conversely, Germany's higher productivity does not offset its cost disadvantage. The German Economic Institute (IW) puts unit labour costs in German industry in 2024 at 22% above the average of 27 comparison countries.

Location risks: the example of Romania

Romania is an established location. The German-Romanian Chamber of Industry and Commerce counts around 8,500 active companies with German participation and about 220,000 direct jobs. Automotive suppliers are concentrated mainly in the west of the country, for example in Timiș and Arad, and in central Romania around Sibiu, Cluj, Alba and Brașov.

The conditions have become less favourable, however. The budget deficit in 2025 was around 7.9% of GDP, the highest in the EU. Romania is subject to an EU excessive deficit procedure, and VAT was raised to 21% in August 2025. Germany Trade & Invest expects growth of only 0.5% in 2026 with inflation of 6.8%. And the German chamber of commerce in Romania names rising labour costs and a shortage of skilled workers as its members' main concerns.

The costs that never appear in a first quote

One of the most thorough studies on the subject comes from the Fraunhofer Institute for Systems and Innovation Research ISI on behalf of the Association of German Engineers (VDI). The data is older (2013 to mid-2015), and no more recent survey of this depth exists. The results are nonetheless revealing:

• Only 9% of industrial companies had relocated during this period.
• For roughly every third company that relocated, one company moved production back.
• More than half of relocations went to the new EU member states in Central and Eastern Europe.
• As reasons for returning, more than 50% each cited a loss of flexibility and delivery capability and quality problems; around 25% cited underestimated coordination and support costs.

In an earlier ISI survey (2004 to 2006), around seven in ten companies that moved back even cited quality problems.

What is typically missing from the calculation:

• Ramp-up curve: new employees, new processes and new suppliers need months before scrap rates and cycle times reach target levels.
• Duplicate structures: during the transition, two sites run in parallel, with double costs and double management effort.
• Logistics and inventory: longer routes mean higher inventories, more tied-up capital and longer response times.
• Quality assurance and support: travel, audits, training, rework — costs that are rarely allocated to a single cost centre.
• Loss of know-how: anyone who relocates assembly often relocates knowledge about the product as well.
• The way back: moving production back is expensive. Machinery, employees and customer trust cannot simply be brought back.

Models: from contract manufacturing to a company-owned plant

Contract manufacturing as a service

In contract manufacturing — also known as outward processing — a partner abroad performs the labour-intensive steps as a service. Materials and components come from the client; the processed part is returned. The model has been common in the clothing industry for decades, where Romania is considered the most important supplier in Central and Eastern Europe. The advantage: low investment and a quick start. The disadvantage: little control over the partner's quality, capacity and priorities.

In customs terms, this is straightforward within the EU. Romania and Bulgaria are part of the single market, so no customs procedure is required. For third countries such as Serbia, outward processing relief means that on re-import only the value added abroad is subject to duty.

Partial relocation

Automated and critical steps remain at headquarters, while manual work moves to a company-owned or partner plant. This model combines cost advantages with control over the core of the product, but requires clean interfaces and strong quality assurance.

Own plant or joint venture

A company-owned plant offers the most control and, in the long run, often the best costs. But it ties up capital and management for years. A joint venture with a local partner reduces start-up risks but creates new dependencies.

The alternative: automation

The ISI data reveals a remarkable connection: highly digitalised companies moved production back about ten times as often as less digitalised ones — around 5% compared with 0.5%. Companies that automate need fewer hands, and then the hourly rate matters less.

The calculation before the decision

Before relocation is decided, these questions should have reliable answers:

1. Total cost instead of hourly rate: what does a finished part cost at the customer — including scrap, logistics, inventory, support and quality assurance?
2. Wage development: what does the calculation look like if local wages keep rising by 8 to 10% a year?
3. Start-up costs: how long will it realistically take for quality and productivity to be in place, and who finances that period?
4. Energy and location risks: energy prices, taxes, political stability, exchange rate.
5. Funding: Romania has around €31.5 billion available from EU cohesion policy for 2021 to 2027. Which programmes fit, and what conditions are attached?
6. Automation as a benchmark: what would it cost to automate the same step at the existing site?
7. Leadership and execution: who builds up the new site, who manages it — and who keeps headquarters stable during the transition?

Where Evoraxia comes in

The question of relocation comes up particularly often in restructurings: when the cost base no longer holds, relocating, automating and streamlining are all on the table. We bring more than an analysis. We invest our own capital, take on responsibility in management and know production from our own experience — with a team covering production engineering, restructuring and finance, and with the resources of our own manufacturing companies.

Whether relocation is the right path depends on the full calculation. A first conversation about it is confidential and without obligation.

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This article is for general information only and does not replace legal, tax or business advice in an individual case. Euro figures for countries outside the euro area depend on the exchange rate. Figures as of September 2026.