BERLIN - November 12, 2025 - European industry is showing tentative signs of stabilization despite persistent challenges, according to perspectives emerging from recent energy and industrial gatherings. While manufacturing output remains weak across major economies like Germany and France, innovative energy projects and strategic corporate adaptations are providing glimmers of hope for Europe's industrial future.
The mixed outlook comes as the European Union grapples with energy price pressures, stringent environmental regulations, and shifting global trade relationships that have particularly affected key industrial sectors.
Industrial Landscape Shows Divergence
Recent economic data reveals a deeply divided European industrial sector. The eurozone manufacturing PMI data for October indicates that while southern European nations like Greece and Spain continue their expansion, Europe's traditional industrial powerhouses - Germany and France - remain in contraction territory .
Germany's manufacturing output growth slowed significantly in October, with demand不足 and ongoing uncertainty continuing to drag down the entire sector. The situation appears even more challenging in France, where manufacturing PMI registered at 48.8 in October, marking the 34th consecutive month of contraction .
"Eurozone manufacturing's recovery momentum remains weak at best," said Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noting that the sector's recovery could be described as "a very fragile sprout at most" .
Energy Innovation Offers Path Forward
Amid these challenges, Swiss energy company Axpo is pioneering innovative approaches that could help address Europe's energy vulnerabilities. The company is currently constructing a unique 2 MW vertical photovoltaic plant on the dam wall of the Muttsee reservoir in the Swiss Alps at nearly 2,500 meters above sea level .
This ambitious project, comprising approximately 6,000 components deployed across 10,000 square meters, represents the type of innovation that could support Europe's industrial transformation. The high-altitude location offers significant advantages, particularly during winter months when energy demand peaks but solar generation typically declines in lower-altitude installations .
"The Muttsee dam is ideally suited for photovoltaic use," said Christoph Sutter, Head of Renewable Energies at Axpo, highlighting the optimal orientation and grid connection as key advantages .
The project exemplifies how Alpine solar systems could help address Switzerland's winter electricity shortfall, with the Muttsee installation expected to generate approximately half of its annual output of over 2.7 GWh during winter months - dramatically outperforming similar-sized plants in Switzerland's flatter lowlands .
Andy Heiz, Head of Axpo's Generation and Grids Division, acknowledged that while a single plant won't transform the energy landscape, such innovations point toward solutions: "We have to install PV systems in locations that are not part of protected areas and have already been properly developed" .
Broader Energy Transition Gains Momentum
Axpo's activities extend beyond Alpine solar. The company has announced agreements to acquire new biomethane production projects in Sicily, with plants expected to begin operation in late 2026 . Additionally, Axpo is exploring the feasibility of building a 100 MW green hydrogen production plant on the island's east coast in partnership with French energy investor ENEGO .
These initiatives form part of Axpo's broader European strategy for biogas and green hydrogen growth, with similar projects underway in Portugal and Poland .
Industrial Sector Faces Structural Challenges
The cautious optimism from energy innovators contrasts with ongoing difficulties in Europe's traditional industrial base. At the recent EU "Friends of Industry" conference in Berlin, German Economics and Energy Minister Reiche highlighted the critical importance of industry to the European economy, noting that industrial production accounted for approximately 15.6% of overall EU GDP in 2024, and nearly 20% in Germany.
However, she sounded alarm bells about the sector's competitiveness, noting that "companies are relocating production outside the EU" and that European industrial production has declined for three consecutive years since 2022 .
The productivity gap between the EU and the United States has widened from 15% to 30% over the past two decades, leaving Europe lagging behind and continuing to fall further back .
Tariff Impacts Compound Challenges
Adding to structural difficulties, American tariff policies have created significant headwinds for European manufacturers. During Germany's recent earnings season, "tariffs" emerged as the most frequently mentioned concern across corporate results presentations .
Siemens Healthineers reported that tariffs reduced group profit by approximately €400 million in the 2025 fiscal year, while Porsche disclosed costs of about €300 million in the first nine months of the year alone, contributing to a 99% drop in operating profit .
BMW also noted significant impacts, with its automotive EBIT margin declining by 1.75 percentage points in the third quarter due to tariff effects.
The consequences are visible in trade statistics: Germany's exports to the United States fell by 7.4% in the first nine months of 2025, with August alone seeing a decline of 20.1% . America has subsequently lost its position as Germany's largest trading partner to China .
Glimmers of Hope Emerge
Despite these challenges, some positive signals have emerged. European companies are expected to report 6.2% earnings growth in the third quarter, according to LSEG I/B/E/S data, above the 4.3% increase analysts predicted just a week earlier .
Companies have adapted to the challenging environment through various strategies, including frontloading exports, reassessing supply chain strategies, raising prices, and cutting costs .
European Central Bank policymaker Boris Vujcic noted that tariffs have not hurt the European economy as much as initially feared, though he acknowledged that the effects of import frontloading before duties took effect continue to unwind .
The service sector has provided additional support, with eurozone composite PMI rising to 52.5 in October - the fastest expansion rate since May 2023 - driven primarily by a sharp acceleration in service activity .
Long-term Transition Requires Balanced Approach
The path forward for European industry appears to require a combination of innovation, strategic adaptation, and policy support. As Andy Heiz of Axpo noted regarding solar expansion, "Political and economic prerequisites must be met" to enable meaningful change .
The European Union continues to walk a tightrope between its ambitious environmental goals and industrial competitiveness needs. Recent methane regulations that have complicated U.S.-Europe LNG trade illustrate the balancing act facing policymakers .
With nuclear life extension emerging as another potential component of the energy transition - demonstrated by Axpo's investment in extending the operation of its Beznau nuclear power plant - the European industrial landscape appears poised for continued transformation.
As European industry navigates this complex landscape, the cautious optimism expressed by energy innovators like Axpo suggests that technological innovation and strategic adaptation may yet help the continent's industrial sector overcome its significant challenges.
About Axpo
Axpo is a leading Swiss energy company with a significant presence across Europe. The company specializes in renewable energy development, including solar, biogas, hydrogen and nuclear power, and is actively involved in energy trading and grid management.
