As of: April 3, 2024, 5:50 p.m
By: Matthias Schneider
Comments
Press
Split
In the USA we don't do things by halves: wind power is cheaper here than conventional energy ever was in Germany. © IMAGO/bill_perry
Many German – and Bavarian – companies are currently looking forward to the USA. Bertram Brossardt, General Manager of the Bavarian Business Association, explains what Europe can do.
Munich – Many German companies are currently investing in the USA. A key point: the Inflation Reduction Act (IRA), the huge subsidy program with which US President Joe Biden wants to protect the climate and promote the economy. In an interview, Bertram Brossardt, General Manager of the Bavarian Business Association, explains why the program is so popular.
Mr. Brossardt, it is now unusually common to hear that German companies are investing in the USA. Do you also observe this?
Investing abroad is generally a good thing. The core of the Bavarian business model is to be present worldwide. But we are also observing that there are more investments by Bavarian companies in the USA. The trend started when we first emerged from the pandemic and increased significantly when the Inflation Reduction Act took effect in 2023. A third of metal and electrical companies with a tendency to migrate name the USA as their destination. For another third of these, the IRA had a clear influence. But what is important to me: It's all about new investments. In 20 years I have never seen a company in Bavaria close down and move to the USA. And that continues to be the case: Our companies invest in the USA, but they do not relocate completely there.
Where did companies invest before the IRA?
Stronger in Central and Eastern Europe, that has ebbed significantly. Be it because of the geopolitical situation or demographics. In addition, the mood in Germany and Bavaria is worse than it has been for decades. Investment decisions are of course questioned.
Europe also heavily subsidizes the economy. What does the USA do better?
It would be unfair to say that the subsidies in Europe are fundamentally wrong; a lot of the right things are happening. But the USA has the advantage that the application process there is extremely uncomplicated.
What does that mean?
In Europe, subsidies are paid. This means: The state must distribute the money from the budget to companies through a lengthy democratic opinion-forming process. Accordingly, the rules and regulations are often rigid and complicated.
My news
Contribution service sends letters to thousands of households - if you don't respond, you risk being fined
1,500 euros per month – Citizen’s benefit recipient emphasizes: “It’s just too much money for my standards” read
“Accumulation of vehicles” spotted: Russia’s army is moving new tanks to Crimea
“Significant losses” for Russia: Ukraine repels several attacks on the Dnipro
“That touched a nerve”: Breakfast café has to close shortly after opening – due to too many guests reading
F-16 fighter jets shot down: Putin openly threatens to attack NATO airfield
And the USA?
They grant tax discounts: If a company meets the required requirements, there is automatically a tax credit that everyone can calculate immediately. Every entrepreneur would much prefer that to having to comply with 23 additional regulations and then not knowing exactly when they will actually get the money.
Bertram Brossardt, General Manager of the Bavarian Business Association, explains what Europe can do. © ibw – Information Center of the Bavarian Economy e. v.
So an Intel wouldn't get ten billion for a single plant?
The discussion wouldn't even exist because everyone who meets the requirements gets the tax discount. The Americans generally do it that way, but with the IRA it is particularly noticeable.
What is the core of the IRA?
The US government wants to protect the climate and promote the economy. This includes, among other things, the production of electric car batteries and the generation of green energy. The IRA reduces the costs of battery production by a good third. For onshore wind turbines, it reduces the price of electricity per megawatt hour from around $35 to $15. For comparison: In Germany, electricity costs the equivalent of around $60.
Very attractive, but certainly extremely expensive.
The US government originally estimated a funding volume of $369 billion. But: In principle, the funding volume is not capped and depends on the actual use by companies and private consumers. We estimate that up to $1.2 trillion could potentially be accessed. The biggest item is actually the promotion of green energy.
Just for the climate?
There are also requirements that a certain part of the added value and raw materials must be sourced from the USA. This is currently driving growth.
Could the tax credits also be implemented in Europe?
Not according to the current legal situation. There is also a certain tradition against it in Europe, including a German one. Often because there is a feeling that only large corporations benefit from tax credits. I don't think it's realistic that we can change our funding system so soon.
What could we do in Europe?
Create clear, simple funding guidelines and implement them quickly. But funding is only one factor.
The others are?
Corporate and income taxes are too high, energy costs and the complex, slow bureaucracy are major burdens. The IRA alone is just one of many incentives. But this package of problems in Europe simply makes the USA attractive.