The great winner of the high energy prices in Germany is the US. An increasing number of German companies are moving to the US for sound business reasons: cheap energy prices, low taxes and strong government support.
Germany is threatened with de-industrialisation. The federal Minister of Economy Robert Habeck conceded that the high energy prices is doing “lasting damage” to the Germany economy.
“Sometimes it’s just a smoldering fire, sometimes the hut is already burning. In any case, the future viability of our economy is at risk, there is a risk of permanent damage,” Habeck recently told the German press agency.
Companies Can No Longer Cope
Energy intensive companies are shifting operations to the US because they can no longer cope with the soaring gas prices and supply chain bottlenecks. This comes just as President Biden has signed into law a legislative package dubbed the “Inflation Reduction Act” in August 2022 offering a series of incentives for manufacturing and green energy. It almost appears that Washington was planning to receive a surprise industrial exodus from Germany and Europe.
Tesla Inc. announced it was postponing plans to make battery cells in Germany and was instead considering production in the US in order to benefit from battery manufacturing tax credits under the US Inflation Reduction Act. According to the Wall Street Journal, the tax credits that could offset more than a third of production costs.
ArcelorMittal SA said this month it would cut production at two German plants, and focus on its American factory in Texas because it was more competitive. Chief Executive Aditya Mittal spoke of Texas as a “region that offers highly competitive energy and, ultimately, competitive hydrogen.”
In the US, the southern states are at the top of the game in luring German companies, systematically targeting the reasons that are turning key industries from Germany.
“We recently had the lowest energy costs in the USA in eleven of 14 quarters,” says Kevin Stitt, Governor of Oklahoma told the Handelsblatt.
Georgia Secretary of Commerce Pat Wilson lauds the same: “Our energy costs are low and the grids are stable.” The secretary flew to Germany in 2022, visiting visited BMW, Porsche and Mercedes-Benz in Munich and Stuttgart with one objective: to make Georgia the center of electromobility by getting German companies to move there. To achieve this, the state knew it would need to address the number one concern of German companies, which is cheap energy, and low taxes.
While the German government persists to say there will be no u-turn on the Merkel-era ban on nuclear energy, the US state of Georgia is precisely betting on nuclear to attract new business. Two new nuclear power plants connected to the grid by 2024. “Companies that come to Georgia reduce their carbon footprint,”
The German bet paid off handsomely for Georgia. German companies are among the top foreign investors and job creators in Georgia, and since last fall, more companies are making investments there.
Aurubis is investing $340 million in a new metal recycling plant, Hapag-Lloyd 18 million in the new North American headquarters, and Böhringer Ingelheim is investing $57 million in a research center.
The US state of Oklahoma is also directly targeting Germany companies.
“Are you a company from Germany and considering a US presence? Then Oklahoma is 100 percent the right location,” says Governor Stitt. “We are right in the middle of the United States. Wages are 40 percent lower than in California. And people work hard.”
Oklahoma knows German companies are looking for cheap energy. “We’re number one on this topic,” says Governor Stitt, pointing out that 40 percent of the energy comes from renewable sources, and has is only third in place. What’s more, “our regulators are here to make your job easy”.
More than 60 German companies have reportedly expanded to Oklahoma, including Lufthansa, Aldi, Fresenius and Siemens, with investments of almost 300 million dollars.
The aggressive American business strategy is working well so far, with numerous German companies planning to set up operations in US states like Virginia, Georgia and Oklahoma.
Meanwhile, the Deutsche Bank recently predicted that German economy will collapse by more than two percent in 2023. But in the US, “factory jobs are booming like it’s the 1970s“.