Finding a location in the USA: What to look out for when choosing a location

The USA is Germany’s most important trading partner: goods worth EUR 161.4 billion were exported to the USA in 2024. This corresponds to 10.4% of all German goods exports amounting to EUR 1,556 billion (source: Federal Statistical Office). However, in view of the trade barriers announced and in some cases already introduced between the USA and the EU, there is a risk that German exports to the USA will collapse and that US business will become less profitable for German industry.

Many companies are therefore increasingly focusing on a “local for local” strategy, i.e. production in the USA for the local market. The establishment or expansion of production capacities in the USA usually goes hand in hand with the search for a suitable production location.

When searching for a location in the USA, both the various country-specific location factors and the special requirements of the “Local for Local” strategy should be taken into account. These include the labor market, educational infrastructure, industry focus, transport infrastructure, spatial structure, subsidies, natural conditions and disasters as well as local procurement and sales markets.

In this article, we explain the most important aspects of choosing a location in the USA in order to answer the following questions:

• Which US regions offer suitable location conditions?
• What funding opportunities can companies take advantage of?
• Which local partners should companies work with?

The labor market in the USA

Currently, the average wage costs in the manufacturing industry in the United States are USD 91,000 (equivalent to around EUR 84,000). This figure includes not only the gross wages of employees, but also the associated social security contributions borne by the company. By comparison, the average wage costs in Germany were around EUR 66,000, in Austria around EUR 69,000 and in Switzerland EUR 94,000.

It is worth noting that the regional disparities within the USA result in large differences in regional wage costs. The states of Arkansas and Mississippi have the lowest wage costs with an average of around USD 65,000. These low wages are often found in more rural regions or in states with a lower cost of living structure. The US states of California (USD 135,000) and Massachusetts (USD 110,000), which are characterized by a high proportion of highly qualified specialists in well-paid industries, are the counterpart to this.

Salaries for employees in engineering, IT, sales and management are generally significantly higher in the USA than in Europe. Wage costs in these occupational groups can be up to twice as high there.

The differences in labor costs within the USA are considerable. At the same time, however, the USA offers hardly any labor cost advantages compared to the DACH countries.

Dr.-Ing. Kai Philipp Bauer, Senior Manager

The unemployment rate in the United States currently stands at 4.0%. South Dakota is particularly noteworthy, with the lowest unemployment rate in the country at 1.8%. In contrast, Nevada has the highest unemployment rate at 5.6%. In addition to Nevada, the states of California, Kentucky and Illinois are also among those with an unemployment rate of over 5%.

However, the majority of US states are in a range between 3% and 4%, indicating a stable labor market situation in many parts of the country. Nevertheless, there are considerable regional differences within these states, which can be seen at county level. This can be illustrated by the example of Arkansas. While the average wage costs are USD 65,000 across the entire state, in some regions wage costs of less than USD 40,000 can be found, while in the regions around Texarkana and in the north-east of the state, employees are paid up to USD 110,000. A similar situation is reflected in the unemployment rate. The spread within Arkansas is between 2% and 6%, while the average is 3.5%. It is therefore worth taking a closer look.

Energy costs in the USA

The energy market in the USA is less regulated and more decentralized than in Germany, Austria or Switzerland. As a result, pricing is much more liberal and companies can negotiate customized tariffs with their supplier depending on purchase volume, micro-location, load profile and contract duration. In addition, there are hardly any levies and taxes, which often makes industrial electricity significantly cheaper in the USA.

On average, the price of electricity in the USA is around 8 cents/kWh, compared to an average of 28 cents/kWh in Germany (non-households, annual 500MWh – 2000MWh, incl. taxes and levies). However, there are also regions in the USA with higher electricity prices. On the mainland, Rhode Island (20 cents/kWh), California and Massachusetts (both 18 cents/kWh) are the most expensive regions in terms of electricity costs. The cheapest electricity prices are offered in the southern states, where they are between 5 and 9 cents/kWh.

The picture is similar for gas prices. The lowest prices of around 1 cent/kWh are in Texas. This is due to the significant oil and gas industry in Texas as well as a well-developed pipeline infrastructure, which enables low transportation costs. In addition, the tax burden on gas in Texas is low. In the other southern states, gas prices are between 2 and 3 cents/kWh, with the exception of Arkansas (4 cents/kWh). North Dakota also offers favorable gas prices. The most expensive regions are the west and north-east of the USA, where gas prices fluctuate between 5 and 6 cents/kWh. Nevertheless, gas prices in most regions of the USA are generally lower than in Germany, where the gas price is 9 cents/kWh.

In the southern states of the USA, companies pay 83% lower electricity prices compared to Germany. Up to 90% of energy costs can even be saved on gas!

Dr.-Ing. Kai Philipp Bauer, Senior Manager

Due to these lower energy costs, the southern states are particularly attractive for energy-intensive industries such as the chemical, pharmaceutical and food industries when looking for a location in the USA.

Natural disasters in the USA

Progressive climate change is leading to a higher frequency and intensity of natural disasters in the southern states of the USA. This is an increasing problem, as two recent examples show: Most recently, devastating hurricanes such as Helene and Milton hit the south-east of the USA and severe fires were reported from California, especially in Los Angeles.

Natural disasters are not exceptions in the USA, but are a regular occurrence. The south-east and west of the USA are particularly affected by extreme weather events. For example, a total of 124 fires were recorded in California between June 2014 and June 2024. In the same period, Florida experienced the most tropical storms in the country with 22 hurricanes. This equates to two hurricanes per year. The states from Texas to North Carolina are also regularly affected by hurricanes, especially along the coastal regions.

Although tornadoes are more frequent than hurricanes, their impact varies greatly. In 2024, for example, there were 1,780 tornadoes in the USA, but only 43 of these were classified as Category 3 (Severe) and 4 as Category 4 (Destructive). Tornadoes can cover the roofs of factories, knock down walls and destroy unprotected outdoor facilities such as tanks. Companies should therefore take infrastructural precautions, especially if they want to produce in the Midwest (Texas, Oklahoma, Kansas, Missouri, Nebraska).

Natural events such as hurricanes, tornadoes, floods and fires should be taken into account when choosing a location in the USA.

Katrin Söntgerath, Senior Consultant

The frequency of such events increases the risk of production interruptions and damage to production facilities. Companies located in these regions must therefore be prepared for the increased risk of natural disasters. We recommend examining the risk of natural events in detail when selecting a location, e.g. by means of flood plans.

The transportation infrastructure in the USA

The USA is the third largest country in the world in terms of area. As a result, the distances between production sites and regional markets are generally greater than in Europe. Accordingly, the availability of a suitable transport infrastructure and its optimal use for procurement and distribution is important.

Goods are transported 82% by road and 12% by rail in the USA, with rail accounting for a higher proportion of long-distance transportation. The transit time of road transportation to the company-specific main markets plays an important role in the US market, which is demanding in terms of delivery times. It should therefore be explicitly examined for the locations in question. Large US freight forwarders such as FedEx Ground offer corresponding online tools for this purpose.

If the transit times to your customers are particularly time-critical, it makes sense to use the infrastructure of the major CEP companies in the USA (UPS, FedEx, DHL) as a guide. These have their hubs at the following US airports, with the first-named hub representing the main location:

• UPS: Louisville, Ontario, Dallas, Rockford, Philadelphia and Atlanta
• FedEx: Memphis, Indianapolis, Fort Worth, Greensboro, Newark and Oakland
• DHL: Cincinnati, Los Angeles, Chicago, New York and Miami

Subsidies

The USA offers attractive subsidies, but these can vary considerably depending on the state, sector and type of project. The most common types of subsidies include tax incentives, e.g. in the form of tax credits on investments. The requirements vary depending on the county. As a rule, a minimum investment and the creation of a certain number of jobs are required as prerequisites for the subsidy.

In the USA, there is fierce competition for investments between the states, which companies can use to their advantage.

Katrin Söntgerath, Senior Consultant

Another important component of the subsidies is the promotion of on-the-job training. Companies receive financial support for every new employee who is qualified as part of a practical training program. This training can take place in cooperation with community colleges, which train employees in practical activities such as plant operation, production techniques or quality control. The training program is individually coordinated between the company and the community college in order to meet the specific requirements.

In addition to tax relief and training-on-the-job grants, there are also other subsidies, particularly for small companies and activities in research and development.

At a local level, land is often offered at reduced conditions or a symbolic price. These plots are owned by the municipality or the county. Depending on the size of the plot, six to seven-figure sums can be saved in this way.

The variety of available subsidies allows for differentiated support, which varies depending on the company project and region. Through an initial assessment, companies can make an approximate estimate of the amount of possible subsidies without the need for a detailed application.

Business development vs. management consultancy

All US states maintain their own Economic Development Corporations, some of which operate at considerable expense – for example through their own representative offices in Europe. Their aim is to attract investment to the respective state. To this end, they often provide free information and services relating to location search and development. Rothbaum also works regularly with these business development agencies in the later stages of the location search.

Working with an independent management consultancy such as Rothbaum offers decisive added value for companies looking for a new production site in the USA:

1. independent and objective analysis:

Economic development agencies primarily represent the interests of their respective federal state and present its locational advantages in the most positive light possible. Business consultancies, on the other hand, act independently and evaluate potential locations objectively on the basis of the company’s specific requirements.

2. Comparative location analysis:

A management consultancy analyzes several locations in parallel, enabling a comprehensive, cross-state comparison from an economic, logistical and regulatory perspective.

3. Optimization of supply chains and infrastructure:

In addition to government incentives, sound advice also takes into account aspects such as transportation routes, availability of skilled workers and long-term growth opportunities – factors that economic development may not fully address.

The USA is an increasingly important sales market for many European companies due to its market size and stable economic growth. This is why companies are often responding to the changes in US trade policy under Trump with a “local for local” strategy and are establishing production sites in the USA. In this way, they are securing or even expanding their market access. Although no labor cost advantages are to be expected, significant savings can be made on energy costs, transportation and customs costs. When looking for a location in the USA, numerous location factors such as educational infrastructure, real estate market and taxes must be taken into account in order to select the optimal location.