Jens Südekum is Professor of International Economics at the Institute for Competition Economics (DICE) at the University of Düsseldorf and a member of the Scientific Advisory Board at the Federal Ministry for Economic Affairs and Energy. (Archive image) © IMAGO/Thomas Bartilla
Viessmann, a traditional heating engineer, is moving to the USA. Prof. Jens Südekum from the University of Düsseldorf explains the role played by the traffic light energy transition in this.
Munich - The well-known German heating manufacturer Viessmann actually plays a central role in the energy transition of the traffic light with its heat pumps. But only a few days after the cabinet gave the green light for the heat transition of Economics Minister Robert Habeck (Greens), the Hessians have agreed to a multirillion dollar takeover by the US giant Carrier. In an interview, economist and energy expert Prof. Jens Südekum from the University of Düsseldorf explains why Viessmann is putting itself up for sale, what role the energy transition plays in it and how great the risk is that Habeck will cash in on the deal on the home stretch.
Prof. Südekum, the German heating engineer Viessmann is being sold to the US company Carrier. This means that a traditional German company that is over 100 years old is changing hands. How sad are you?
I see the deal with a tearful eye, also because a large German medium-sized company apparently does not dare to become the green champion on its own and to retain control over the fate of the company. But from the family's point of view, the sale is certainly understandable at this point in time.
Why?
The profits that can be achieved with heat pumps in the market are currently at their peak and are likely to decline in the coming years as competitive pressure in the market is expected to increase sharply in the future and profit margins are thus under pressure. In this respect, the sale now probably comes at the optimal time. Especially since you now need capital for expansion in order to be able to scale and keep up with the Asians who are pushing into the German market.
What role does the German government's heat transition play in the sale?
The heat transition is heating up the market for heat pumps extremely - whether it is the planned bans on oil and gas heating systems or the planned financial subsidies for heat pumps. This makes the German market very interesting for companies from Japan, China and South Korea. The good news from the consumer's perspective, however, is that the price of heat pumps is likely to fall significantly in the foreseeable future.
What order of magnitude are we talking about here?
It's hard to say seriously. But perhaps this much: In the case of photovoltaic systems, there have been price declines of 80 to 90 percent due to scaling and higher competitive pressure. In the case of heat pumps, scaling and competition will also put a lot of pressure on prices.
So should consumers wait and see?
I'm not an energy consultant (laughs). But if I don't have any pressure, I would actually wait another year or two, because the mechanisms are likely to start gradually. In the very short term, prices could even rise because some homeowners want or need to order now and we still have struggling supply chains, longer waiting times and fully booked craftsmen.
0
Also Read
Fashion retailer from southern Germany insolvent - all branches are closed
READ
Next blow after Viessmann deal: Germany's largest heating engineer no longer sells oil heating systems
READ
Heating oil price at an all-time low: Expert reveals whether you should fill your oil tanks now or wait and see
READ
Heating law: Habeck is open to a later start date – Union calls for complete abolition
READ
"Total failure": Union threatens with weeks-long rail strikes – but there is good news
READ
Fancy a voyage of discovery?
My Area
In addition to Viessmann, other major manufacturers such as Buderus and Vaillant are also active in the market. Will they be able to hold their own against the onslaught of low-cost competition from the Far East?
First of all, Viessmann heat pumps will not disappear from the market with the takeover. Production is even to be expanded. In the case of jobs, too, an increase rather than a reduction is to be expected. To this end, the company is currently setting up production in Poland. And as far as the other two German manufacturers are concerned, I very much hope that they will not decide to sell, but to expand by raising capital and expanding production capacities.
How is that supposed to work in view of the threat of low-cost competition?
One way in the battle with cheaper suppliers from Asia could be that German manufacturers do not rely on 08/15 standard products, but also occupy the quality segment, similar to other markets. So: Be better than the competition, but also a bit more expensive. In other markets, Germany does not rely on the mass production of cheap goods, but on quality - whether these are cars or steel.
The situation with heat pumps is reminiscent of the German solar market after the turn of the millennium. After a state-sponsored boom, the German solar industry has finally been ousted from China by heavily subsidized manufacturers from the state. Is there now a threat of a similar development in Germany?
I don't see that trend yet. Viessmann is not discontinuing its heat pump business. But you have to keep a very close eye on this development. If, one day, domestic production were to be cut back sharply and jobs were to disappear massively, alarm bells would ring for me. At that time, the suppliers of solar panels were massively subsidized by the Chinese state. We don't have that with heat pumps at the moment. But when the production of heat pumps reaches the mass market in this country, we have a problem. As a rule, we cannot produce such standard products at competitive prices in Germany. We should therefore be careful not to make the same mistake as we did with the solar industry, which in the end completely disappeared from Germany – not only production and jobs, but also all research and development in this area. That's all in China now, including the know-how. This should not happen with heat pumps. We would do very well to keep at least the research and development of heat pumps in Germany in the long term, so that we can also develop the heat pump of tomorrow here. You can't do that without a certain amount of production.
Federal Minister of Economics Robert Habeck wants to take a close look at the planned sale. Could the deal still topple?
In the Viessmann case, the Federal Minister of Economics could invoke the Foreign Trade and Payments Act. But I don't think he will do that and I wouldn't advise him to. The case might be different for a Chinese investor, but for a US investor with a strong merger component, I see no reason to prevent the takeover. In the long term, however, we should actually ensure that the value added in the R&D area of heat pumps is kept in Germany. We also have the necessary instruments for this, for example through subsidies, just think of the Important Projects of Common European Interest. There are EU subsidies for semiconductors or battery cells. I could also imagine such a regulation for high-tech heat pumps.
