Not ‘Made in Germany’, but ‘Made in America’. German politicians fear it will become more attractive for car companies to manufacture overseas, at the expense of manufacturing on home soil.
A cause for concern is the deflationary act, a Mega Investment Package The US government recently announced plans to combat inflation at home while making the industry more stable. Companies that produce more sustainably can reap significant benefits.
Discounts on electric cars from the US
Part of that package: Americans can get up to $7,000 in rebates when they buy an electric car. But only if it’s made in America.
That affects the traditional German car industry. Because German car manufacturers can only sell their electric cars with American parts in large quantities if they roll American factory tires. Similar requirements apply to car batteries.
It’s painful because the US is Germany’s most important export country and cars are a major part of its exports. Within the Volkswagen Group, more production in the United States is already being given serious consideration.
A big difference
“This package by the U.S. makes a big difference,” says Martin Kornick, an economist at the German economics institute DIW. Energy prices are much lower in the U.S. than in Germany, he says, and other factors for companies are more stable. “Now there’s something added, an incentive to look for an alternative location in America.”
This is a relief for entrepreneurs compared to Germany.
Thirty years ago, Dutchman Andries Broekhuijsen started a company in robot parts in Dulmen, Germany, across the border from the Netherlands. Becker makes robotic cables that, among other things, transmit power and data to robot arms, especially for car manufacturers to use to automatically assemble their cars. BMW, but also Volkswagen, Audi and Porsche buy those weapons.
Major German brands already have factories in the US, and Broekhuijsen also has a branch there. He recently decided to expand there significantly: he is investing 30 million euros in a new factory, which should create more than 130 additional jobs.
He says it’s the sum of many considerations. This means more technical staff available. “Of course it has to do with energy costs, which are much lower there. And with bureaucracy. There are fewer barriers.”
At the same time, he can count on considerable support from the government. He got 14 hectares of land for his factory at much less than the market price. And he already knows that he will receive tax subsidies in the coming years. “There’s a lot of focus on that. For entrepreneurs, it’s a relief compared to Germany.”
A large US investment portfolio is now included in it. “As entrepreneurs, we only see it as positive. Because we get more opportunities,” says Broekhuijsen.
“It doesn’t mean that we’re suddenly burning all our bridges behind us. But it does mean that much of the manufacturing that we could have done for America will be done in America.”
More subsidies in Europe?
Time for Europe to open up subsidies further, says economist Gornick. “The EU must take a step into the future together, or it will stand still and depend on the US.”
He understands concerns about protectionism. “Of course when it comes to concrete conditions, the US will also learn to deal with this. Because avoiding the international division of labor altogether is too expensive for the US. They will get less good technology for a lot of money.”
But companies cannot make the much-needed transition to sustainable energy and technology without government support. Gornick says. “This new role of government in production and innovation poses a major challenge to trade policy. The question is how to fairly organize the opportunity for both parties to conduct their business in the future.”
The German finance minister did not like the idea of establishing a joint fund in the EU, with which Europe could also provide subsidies. He would like to see Germany itself relax European state aid rules.
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