Chances for Germany's deindustrialisation are slim, cost rises will boost efficiency – Bosch CEO

Higher energy prices in Germany will not lead to an “industrial exodus” of companies seeking cheaper production locations abroad but rather strengthen efficiency and innovation, Bosch CEO Stefan Hartung wrote in a guest article for business daily Handelsblatt. “The change that almost all companies are going through is fundamental, challenging and, in the light of climate change, without alternative,” Hartung said. German companies invest enormous amounts in research because they are aware “that a cost-intensive industry like the one we have in Germany can only safeguard its success with products and processes that are clearly among the best in the world,” he argued. If part of these efforts is taking place abroad, this would not at all indicate an “industrial exodus,” the engineering heavyweight’s CEO said. “Of course, industry will change massively. But that does not necessarily mean it will dramatically shrink,” he added. While some energy-intensive production procedures could be relocated abroad to benefit from cheaper renewable power and green hydrogen, price pressure in general will lead to even more energy-efficient procedures, Hartung said. Green tech could soon become a major pillar of the German economy, but this would not require a “managed economy.” It rather should be supported by reducing bureaucracy, European solidarity and co-ordinated immigration and education policies, Hartung said.

Fears about deindustrialisation spread in Germany following the European energy crisis and rising production costs for industry that could lead companies to redirect investments abroad. While energy prices have come down from their peak in late 2022, concerns over long-term effects on the industrial sector remain, even though the German government and the EU have signalled they are willing to support companies in transforming their production in line with climate targets. They also vowed to repatriate and strengthen production of key energy transition components in Europe and to bank on green technology becoming a major growth market.