“I have no free space now,” said Mayor Fred Mahro. The turning point came last year when a Canadian clean technology company chose the city to build Europe’s first lithium converter, a key component for electric car batteries. Guben has won over 60 other potential locations across the continent. Rock Tech Lithium’s € 500 million investment will make Guben an important link in the battery supply chain and breathe new life into the city. “Guben was like Sleeping Beauty,” says Mahro. “Rock Tech kissed it awake.” The arrival of Canadians is emblematic of a massive influx of investment into the former communist East, which has become home to Europe’s fast-growing electric car sector. An area that was once a symbol of economic decline, it is becoming one of the hottest pieces of industrial real estate on the continent. The last two years have been flooded with new projects and investments. Most striking of all was chip maker Intel announcing in March that it would build at least two € 17 billion semiconductor plants in the eastern city of Magdeburg – Germany’s largest foreign direct investment. It came the same month that Tesla began production at its first European electric car plant in the eastern city of Grünheide. This comes at the top of the two electric vehicle factories converted by Volkswagen in the cities of Zwickau and Dresden. “Guben was like Sleeping Beauty,” said Mayor Fred Macro. “Rock Tech kissed it awake” © Gordon Welters / FT East Germany is now “one of the most attractive economic regions in Europe,” Chancellor Olaf Solz said at a conference earlier this month. “And internationally, the word is circulating.” Investment could herald a profound change in Germany’s industrial geography. For decades, the country’s economic power has been concentrated in the south and southwest, home to automakers such as Mercedes and BMW and engineering giants such as Siemens. But that could change as the East re-industrializes. “Germany’s economic map is being redrawn,” said Carsten Schneider, the German government’s commissioner for the east. Indeed, the new investment comes at a time when Germany’s traditional internal combustion engine-based car industry is under unprecedented pressure as governments around the world look to a future without fossil fuels and the transition to electric cars is accelerating. The pressure is evidenced by the European Parliament vote earlier this month to ban the sale of new diesel and petrol cars and trucks to the EU from 2035. Across the south and southwest, traditional automotive suppliers – Bosch, Continental, Mahle, ZF Friedrichshafen – have announced job cuts amid falling demand and uncertain prospects. The reverse is true in the east, where Volkswagen opened its first exclusive EV production line in 2019, transforming a plant in Zwickau, Saxony that once built the Soviet-era Trabant, which VW took over after German reunification. “The area and the people are familiar with the upheaval, which was certainly not a disadvantage,” said Karen Kutzner, chief financial officer of VW Saxony. The company aims to build 300,000 electric cars a year at the construction site and a few thousand more in nearby Dresden, adding about 1,000 jobs to the process. The Zwickau area is now almost full-time, thanks in part to companies such as cable company Leoni, which has invested around € 130 million in the area to supply VW plants. BMW is adding hundreds of rolls to its Leipzig plant, which will build battery units. Jörg Steinbach, Minister of Economy of Brandenburg, the state that surrounds Berlin, which is Tesla’s new European home, says he has invested 7 billion euros since 2018 – “this scale is far from previous years”. The regional authorities in East Germany are currently dealing with 28 expressions of interest representing € 11.5 billion in possible new investments. “For a long time, the states of East Germany were in the lower half of the economic performance category,” says Steinbach. “I believe the league will become much more oblique to the east in the next five years.”
Lots of empty space
Take a trip to the Brandenburg countryside and it is immediately obvious what makes it attractive to investors – the place. It has much more freely available land than other parts of Germany, especially the densely populated, highly industrialized south-west. Tesla’s Grünheide plant is located on 300 hectares of land and Intel’s plant in Magdeburg will occupy 450 – the equivalent of 620 football fields. “Such a place is rare in the heart of Europe and highly sought after,” Scholz told a conference earlier this month. “And in East Germany it exists.” The East has another key competitive advantage – the abundant supply of renewable energy sources. Brandenburg generates more electricity than wind, solar and biomass per capita than any other German state. Renewable energy accounts for 94 percent of the state’s electricity demand, compared to Germany’s national average of 46 percent. “[Investors] “Tell us that our company produces batteries for environmentally friendly mobility,” said Economy Minister Robert Habeck at the same conference that Soltz spoke at this month. “And we want to produce our batteries in a sustainable way. . .[so]”The availability of renewable energy sources is a critical factor for energy-intensive companies established here.” A Canadian clean technology company has selected Guben to build Europe’s first lithium converter, a key component for electric car batteries © Gordon Welters / FT East Germany is also benefiting en masse from the transition to greater European “sovereignty” – the EU strategy to strengthen its autonomy in critical areas such as batteries and semiconductors, the cloud data and pharmaceuticals. Shocked by the disruptions in world trade observed during the Covid-19 pandemic and the war in Ukraine, countries are increasingly focusing on increasing domestic production of critical components and shortening supply chains to make them less vulnerable to external vibrations. These trends are particularly strong in the area around Berlin. “THE [EV] The industry will have everything it needs here, from lithium processing to battery and cell production to electric car construction, ”says Markus Brügmann, CEO of Rock Tech Lithium. “And our company is right in the heart of this new value chain.” Government subsidies have played a key role in attracting investors. Berlin is providing 6.8 billion euros in financial support for Intel’s project until 2024, of which 2.7 billion euros this year alone. It is also releasing 40 billion euros in funds over the next few years to mitigate the economic implications of its plan to phase out coal, and much of it will flow into East Germany, where there are many lignite mines and coal-fired power plants. must be closed. Roads, railways and research institutes could see a significant unexpected gain. Markus Brügmann, CEO of Rock Tech Lithium, says his company “sits right in the heart of this new value chain” © Gordon Welters / FT However, it is not only the promise of subsidies that lures big tech companies to the east, but it is the region’s long history as an industrial hub. Some of the recent renaissance is based on the foundations laid during the communist GDR: the semiconductor complex near Dresden in Saxony – Europe’s largest – sprang up on the site of Robotron, the former state-owned electronics manufacturer GDR, after companies such as Bosch, Infineon. and AMD realized that highly trained staff and production facilities could be acquired at low cost. This so-called semiconductor “ecosystem” continues to attract cutting-edge companies that want to become new car suppliers, such as the newly formed Estonian company Skeleton Tech with supercapacitors, which is investing 36 million euros in a site in Dresden. “We liked the industrial infrastructure as well as the academic community,” said co-founder Taavi Madiberk, whose company works closely with technical universities in Dresden and a network of sites run by Germany’s state-run applied research agency, Fraunhofer. Saxony has the highest concentration of such institutes, many of which were converted from academies of science in the GDR era. “When you escalate normal production, you need skill in a really wide variety of sectors, which for a technology company does not make sense to build internally,” says Madiberk.
Reversing decades of decline
The arrival of companies such as Tesla and Intel marks a major turning point for an area whose communist-era industrial base virtually disappeared after reunification in 1990. Hundreds of factories closed over the next decade, unemployment soared and young people flocked to west looking for work. “About 70 percent of East German industry has disappeared,” says Steinbach. The lack of economic prospects sparked frustration and anger that sparked the rise of the far-right Alternative for Germany and the anti-Muslim Pegida movement, whose mass protests during the 2015-16 refugee crisis made headlines. Guben characterizes the highs and lows of the region. The city gained a reputation in the 19th century as a center for German hat production – a local landmark, Carl Gottlob Wilke, is still credited with inventing the waterproof wool felt hat made from sheep’s wool rather than traditional rabbit fur. Under communism, the city became a major industrial center, home to a synthetic fiber factory that employed hundreds. But after the reunification, much of the former GDR chemical industry collapsed and took Guben with it. “The fabric mill, the hat factory, the carpet yarn are working – everything is closed,” Mahro recalls. “It was a major hemorrhage” ….
