The surprising revival of eastern Germany
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Loading... - Joyah Leong
- 28 Jun 2022
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Ten years ago, the small east German town of Guben was so desperate for new investors it was prepared to give them land for free. “Now I have no free space,” says mayor Fred Mahro. The turning point came last year when a Canadian clean tech company selected the town to build Europe’s first lithium converter that makes a key component for electric car batteries. Guben won out over 60 other potential sites across the continent. Rock Tech Lithium’s €500mn investment will make Guben an important link in the battery supply chain and breathe new life into the town. “Guben was like Sleeping Beauty,” says Mahro. “Rock Tech kissed it awake.” The arrival of the Canadians is emblematic of a massive influx of investment into the former communist east, which has become the home of Europe’s rapidly expanding electric car sector.
A region that was once a byword for economic decline is turning into one of the continent’s hottest pieces of industrial real estate. In the past couple of years, it has been deluged with new projects and investments. Most eye-catching of all was chipmaker Intel’s announcement in March that it would build at least two semiconductor factories worth €17bn in the eastern city of Magdeburg — the largest-ever foreign direct investment in Germany.
It came in the same month that Tesla started production at its first European electric car factory in the eastern town of Grünheide. That comes on top of the two electric vehicle plants converted by Volkswagen in the cities of Zwickau and Dresden.
Eastern Germany is now “one of the most attractive economic regions of Europe”, Chancellor Olaf Scholz told a conference earlier this month. “And internationally, word is getting around.” The investments could be the harbinger of a profound shift in Germany’s industrial geography. For decades, the country’s economic strength has been concentrated in the south and south-west, home to carmakers such as Mercedes and BMW and engineering giants such as Siemens. But that could change as the east re-industrialises.
Across the south and south-west, traditional suppliers to the automotive industry — Bosch, Continental, Mahle, ZF Friedrichshafen — have announced job cuts amid falling demand and an uncertain outlook. The reverse is true in the east, where Volkswagen opened its first dedicated EV production line in 2019, converting a plant in Zwickau, Saxony that once manufactured the Soviet-era Trabant car and was taken over by VW after Germany’s reunification. “The region and the people are familiar with upheavals, which was certainly no disadvantage,” says Karen Kutzner, chief financial officer of VW Saxony. The company’s aim is to manufacture 300,000 electric cars a year at the site, and a few thousand more in nearby Dresden, adding roughly 1,000 jobs in the process.
