Why did Nazi Germany, a nation that ostensibly had a large industrial capacity that only increased when they annexed more and more land, still leave their armies to rely mostly on horses for transportation? We know that the nazi german state could produce large numbers of vehicles made evident by the large number of tanks they produced throughout the war and we know that they did build some infantry transports like halftracks yet still used large numbers of horses. If someone could explain this choice of transportation that differed from the other major nations involved in the war that would be great. Thanks for any replies!
Because the Nazi automobile industry sucked.
The most common German truck was the Opel Blitz, and the German Army received about 150,000 of them in total both before and during the war. This was not due to a lack of trying; Opel just couldn't build more of them with the resources available!
In comparison the United States sent 400,000 trucks to the Soviet Union alone as part of the Lend-Lease program; and these trucks were larger and had more carrying capacity than the Opels. If we include the trucks built for the US Army and Britain the American automobile industry easily passed the million-truck mark for the Second World War.
To add salt to just how terrible the German automobile industry is, I also have to note that the aforementioned Opel - the single largest truck-maker - was a subsidiary of the American car giant General Motors.
The simple and stark reality of German industrialization is that it was focused in very specific areas - namely steel production, chemical production, and finance. The Germans were very good at making industrial goods that went into making cars and other products, but lagged far behind America when it came to producing finished goods like cars and trucks. This is why they required American investors like General Motors to build up their car industry; but much of that expertise vanished once the Nazis came to power.
The German tank industry quite frankly was also a convoluted mess. The Americans produced more Sherman tanks than every type of German tank combined. The reality is that most German companies making tanks sucked at it, because they had very little experience making automobiles.
To be more specific, the biggest tank-makers were Krupp (Panzer IV), Daimler-Benz (Panzer III), and MAN (Panther). Of these three companies, only Daimler-Benz was a serious automobile maker. Krupp's main expertise was making artillery guns (and was a rival of Rheinmetall) and dabbled in trains. MAN before the war made big diesel engines more suitable for ships, and also dabbled in artillery.
Daimler-Benz was the only one out of the three that focused on automobile gas engines that is closest to tank-making, and the fact that the Panzer III was the best-engineered German tank of the war reflected this. For all of the myths and press about the supposedly superior Panther tank and the workhorse Panzer IV, the only German design to actually impress Allied engineers during the war was the Panzer III and its torsion bar suspension. Indeed, the Soviets liked the Panzer III so much that they converted several hundred captured MK III chassis into their own SU-76i assault guns - the only German armored vehicle to see large-scale Allied service because of how reliable the chassis proved to be!
By contrast all the other German tanks tended to be bigger and heavier than equivalent Allied designs. The Panther for instance is often lauded at the best medium tank of the war, but in reality it was a 45 ton tank that was as heavy as the Soviet IS-2 heavy tank. MAN's inexperience with motor vehicles resulted in a larger, heavier vehicle that had less armor and a smaller gun than the more compact and efficient IS-2. Indeed, the enormous gap in German and Soviet tank technology is reflected by how much bigger the German tanks became on the drawing board while the Soviet tanks became smaller yet had equal or even superior armor and firepower - the Germans essentially kept trying to make tanks based on train / ship engines instead of automobile-sized ones. This is why the "ultimate" German design was the utterly impractical 200 ton Maus, while the ultimate Soviet design of the war - first produced in 1946 - was the T-54/55 which was 10 tons slimmer than the Panther. The T-54/55, by the way, remains the most-produced tank in history and is still in service today.
In short, this idea that Germany was an all-powerful industrial superpower is a myth. It was a great industrial power in some aspects but it was very poor in many others. Trucks and tank-making was not their strong point. And making more trucks and tanks was a rather futile exercise because their oil industry was also pretty weak, so there wouldn't be enough fuel to power all of the tanks and trucks to begin with unless you disband the German Air Force (which was the biggest consumer of fuel).
Edit: Notes on how German industry tried to make monster tanks because they kept trying to build tanks around train/ship engines instead of automobile ones.
The massive German mechanization during WWII is something of a myth- a lot of supply train and material issues prevented a totally mechanized German army.
Armies tend to reform rather slowly, and the general mentality is that, "If it ain't 'broke,' don't fix it." The German army had tons and tons of horses, and they had a huge infrastructure in place dedicated to the breeding, use, and maintenance of horsepower.
Now, every German infantry battalion was supposed to have a mechanized supply line, but repair issues, fuel shortages, and general scarcity prevented the Germans from equipping every infantry battalion with a full compliment of trucks. Wars are big, and supply lines are extremely complicated- basically, you have to just find a way to get the equipment where it needs to go, regardless of how it gets there. If what you have is horses, then use the damned horses.
A lot of German strategists also underestimated the length of the war by a huge amount- they believed that with a short war, horses and rail lines with some trucks would suffice. This would allow them to prioritize the use of in demand war goods, like steel, petrol, rubber, ball bearings, and machine-time, to other pieces of military hardware.
And ultimately, as the German army rearmed and mobilized in the 1930s, they did so in a rather... unorganized fashion. As Larry T. Balsamo writes in his article, Germany's Armed Forces in the Second World War: Manpower, Armaments, and Supply, "The German armed forces in 1939 can accurate be described as having been armed in breadth rather than depth."
What this means is that the Germans had a lot of stuff, but it wasn't organized in a way that was consistent throughout the entire army. They lacked a clear goal when rearming, and ended with a mix of advanced and traditional military equipment and structure.
Moving on, the Americans had a much, much better industrial output, greater access to resources, more fuel, and a more cohesive logistical organization. The Americans were also able to supply weapons and vehicles to Britain and Russia (see the Lend Lease program), which greatly helped with the mechanization of the Allied forces.
The Germans certainly had a lot of tanks, and their tanks were (probably) better than Allied tanks, but the Allies were able to keep their equipment fueled, repaired, and supplied with ammunition much better.
tl;dr: German industrial superiority is something of a Wehraboo myth, and the Americans were way better at industry than the Germans- the Germans were probably better at building hardware, but the Americans were better at getting hardware to the places it needed to be, and the Americans made so much of their stuff that they could give it to their friends. German stuff was so expensive and required so much material to keep running that they couldn't even fully outfit their army with it. (Americans- boring but efficient. Germans- Cool but inefficient).
Sources-
Balsamo, Larry T. 1991. "GERMANY'S ARMED FORCES IN THE SECOND WORLD WAR: MANPOWER, ARMAMENTS, AND SUPPLY." History Teacher 24, no. 3: 263-277. Historical Abstracts, EBSCOhost (accessed March 28, 2016).
Reference List DiNardo, R. L., and Austin Bay. 1988. "HORSE-DRAWN TRANSPORT IN THE GERMAN ARMY." Journal Of Contemporary History 23, no. 1: 129-142. Historical Abstracts, EBSCOhost (accessed March 28, 2016).