EPA
ANNOUNCEMENTS•
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Charlotte Waaijers
corresponding Germany
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Charlotte Waaijers
corresponding Germany
Not “Made in Germany” but “Made in America”. German politicians fear it will become more attractive for automakers to produce across the ocean, at the expense of producing on their own soil.
One cause for concern is the Inflation Reduction Act, a mega investment package that the US government recently announced that it is fighting domestic inflation and making the industry more sustainable at the same time. Companies that produce more sustainably can receive significant benefits.
Electric car discount from America
Part of that package: Americans can get up to $7,000 off the purchase of an electric car. But only if it’s made in America.
And this concerns the traditional German automotive industry. Because German automakers can only sell their electric cars as attractively if they roll from an American factory tire – with a large proportion of American parts. Similar requirements apply to car batteries.
Painful, because the USA is the most important export country for Germany and cars are an important part of the export. Within the Volkswagen Group, serious consideration is already being given to producing more in the United States.
A big difference
“This package from the US makes a big difference,” says economist Martin Gornig, of the German economic institute DIW. Aside from energy prices, which are much lower in the US than in Germany, other factors for companies have remained fairly stable, he says. “And now something has been added, an incentive to look for an alternative location in the United States.”
This is a relief for entrepreneurs, compared to Germany.
Thirty years ago, Dutchman Andries Broekhuijsen started a robot parts company in Dülmen, Germany, just across the border from the Netherlands. Becker Robotic makes cables that, among other things, send power and data to robotic arms, which automakers in particular can use to automatically assemble their cars. BMW, but also Volkswagen, Audi and Porsche buy those weapons.
Major German brands already have plants in the US, and Broekhuijsen also has a subsidiary there. It has recently decided to expand significantly there: it is investing 30 million euros in a new factory, which is also expected to create more than 130 more jobs.
It’s the sum of several considerations, he says. This means that more technical personnel are available. “Obviously it also has to do with energy costs, which are much lower there. And with bureaucracy. There are fewer obstacles there.”
Government support
At the same time, he could count on considerable support from the government. He got the 14 hectares of land for his factory well below market price. And he already knows that in the coming years he will receive tax breaks. “A lot of attention is paid to this. For us entrepreneurs it is a relief compared to Germany.”
To this is now added the substantial package of American investments. “As entrepreneurs, we only find this positive. Because we simply have more opportunities,” says Broekhuijsen.
“That doesn’t mean we’re going to suddenly burn all the bridges behind us. But it does mean that the production that we could have done here for America will take place in America to a large extent.”
More subsidies in Europe?
It’s time for Europe to open up the subsidy tap even further, says economist Gornig. “Either the EU unites and takes a step towards the future, or it stands still and depends on the US.”
He understands the concerns about protectionism. “Certainly when it comes to the concrete conditions, the US will also learn to deal with this. Because to completely abstain from the international division of labor is also very expensive for the US. They would have much less good technology for a lot of money.”
But companies cannot make the much-needed transition to sustainable energy and technology without government help. Gornig says. “This new role of the state in production and innovation is a major challenge for trade policy. The question is how to organize it fairly, so that both sides have the opportunity to manage their industry in the future.”
The German finance minister does not like the idea of setting up a common fund in the EU with which Europe can also disburse subsidies. He would prefer to see Germany itself availing itself of a relaxation of European state aid rules.
