Stuttgart, Dusseldorf The war in Ukraine is disrupting supply chains, commodity prices are skyrocketing and even the transformation to electromobility is becoming a financial undertaking: in this difficult situation, Bosch boss Stefan Hartung has identified a new area of business. The technology group will invest half a billion euros over the next eight years in the development of components for hydrogen electrolysis.
“We want to support the rapid development of hydrogen production in Europe with Bosch technology,” Hartung announced on Wednesday at the annual report presentation. The 56-year-old, who has been leading the group since January, calls these advances: “decoding the future”. With the hydrogen initiative, he is now setting the tone and at the same time continuing efforts to make Bosch less dependent on the automotive sector, which is currently under pressure.
Green hydrogen is considered by experts to be a key element for the success of the energy transition. It is produced using the electrolysis process from renewable electricity, for example from the wind and the sun. Water is broken down into its oxygen and hydrogen components with the help of electricity.
Bosch wants to become more independent with hydrogen production technology
For Hartung, regeneratively produced hydrogen is a key to the successful energy transition as a supplement to electromobility. Experts currently see the increased need in industry, shipping and aviation. Wherever using a battery is more expensive or difficult to implement.
Top-Jobs des Tages
Find the best jobs now and
be notified by email.
Bosch also increased its existing investments in fuel cell technology to one billion euros. The know-how already acquired will now be used in the production of hydrogen. As in the fuel cell, the cell, i.e. the pile of several hundred individual cells, is the central element in the electrolyser. In each of the cells connected in series, the water is converted into hydrogen and oxygen with the help of electricity, as opposed to the fuel cell, where hydrogen and oxygen are used to generate electricity.
>> Be there: At the Handelsblatt Hydrogen Summit you will meet key industry figures
In order for everything to work, the systems are enriched with control units, power electronics and sensors from Bosch. However, if there are gaps in its know-how, the Group also collaborates with development partners, such as in the case of fuel cells.
High gas prices are now making green hydrogen cheaper
Annual investments of between 60 and 70 million euros in the new business area seem manageable for a group with an equity ratio of 45 percent and liquidity in the tens of billions. But the push shows that investing in energy matters is becoming increasingly important to the company.
In fact, green hydrogen from renewable energies should only be competitive in a few years’ time. Since hydrogen from renewable energy cost more than twice as much as hydrogen from fossil natural gas, experts did not expect a breakthrough in future technology for five or ten years.
War in Ukraine: hydrogen more attractive for rising gas prices
But the war in Ukraine has greatly accelerated the change. As the price of gas has risen to a new record high and will remain high for the foreseeable future, sustainable hydrogen is now paying off much faster than expected and could therefore accelerate the acceleration of the hydrogen economy.
Bosch has now quickly resumed this development. Based on EU calculations, the Swabians predict that the demand for green hydrogen will rapidly increase to around ten million tonnes per year by 2030. By then, Bosch predicts that the market for electrolyser components will have global volume. of around 14 billion euros. The highest growth rates are said to be in Europe.
Other industrial giants such as Siemens Energy, Linde or Air Liquide have also recognized the potential and are massively expanding their electrolysis production facilities. Thyssen-Krupp recently announced that it would list its electrolysis division on the stock market under the name of Nucera. The EU expects electrolysis capacities in Germany to multiply from the current 1,000 megawatts to 40,000 megawatts by 2030.
Bosch intends to invest a whopping three billion euros in climate-neutral technologies such as electrification and hydrogen over the next three years. The systems should be combinable as modules and used in both small systems with an output of up to ten megawatts and in large systems with gigawatts. Rapid industrialization is aimed at reducing costs. The first deliveries are scheduled for 2025.
Systems must be controlled via the cloud. To ensure that these projects at Bosch are carried out online, Hartung announced major investments in the digitization of the parent company – ten billion euros over the next three years alone.
Low returns in Bosch’s core automotive business
Business at Bosch went better again last year. With an increase in sales of one-tenth to 78.7 billion euros, the operating result improved from 2.8 to four percent of sales. According to the annual report, net profit in 2021 was around 2.5 billion euros, after around 750 million euros the previous year, heavily impacted by the corona pandemic. But the new head of finance, Markus Forschner, sees the earnings situation once again threatened. As expected, this year sales will increase by 6%, due to inflation among other things, but the return is expected to be between 3% and 4% and therefore below the level of the previous year.
The child problem is business with the auto industry. The Mobility division, the largest division, managed to get back into the black last year, but the result was only a paltry 0.7% return on EBIT. ZF, the second largest German automotive supplier after Bosch, achieved around five percent.
Bosch, with its very high share of electronics, was obviously hit hardest by the semiconductor crisis, not least because the group supplies the production of volume models. Given the lack of chips, automakers have preferred to install semiconductors available in high-margin top-of-the-range models. In addition, high-efficiency diesel technology, one of Bosch’s main sources of income, is becoming less and less in demand.
And the pressure builds. “Bosch will also have to pass on the significantly increased costs of raw materials, semiconductors and logistics to its customers,” division chief Markus Heyn explained to the automaker. “Only then can we continue to operate our automotive supply business in a profitable way.” Car makers like Mercedes had shone in the first quarter with double-digit returns.
Confrontation with car manufacturers is imminent
The industry is now threatened by severe controversies. Because even the market leader Bosch cannot afford such numbers in its long-term core business. And not all automotive suppliers operate from such a strong position and, if necessary, have the ability to compensate with other business divisions. Mahle, a company with a turnover of ten billion euros, recently asked car manufacturers to help with the crisis.
The signals between automakers and suppliers are stormy. As a rule, subsequent improvement negotiations do not take place before the second half of the year. After still stable demand for cars over the past year, demand for vehicles has plummeted in recent months, especially in Europe.
Electromobility: Bosch with orders worth ten billion euros
According to Hartung, Bosch has received orders for electromobility worth ten billion euros, but the margins are often lower than for combustion technology and more competitors are entering the market. The transformation is now entering its decisive phase.
In addition to automotive components, Bosch also produces household appliances, power tools, industrial and construction technology. Hartung hopes for a balance from the currently most profitable divisions.
Boss Bosch sees a slower reduction in CO2 emissions as a short-term effect of the war in Ukraine on climate protection, but in the long-term an accelerated technological transformation, especially in Europe. “For politicians, this may be the reason for greater determination, both in promoting energy-efficient building renovations and in the massive expansion of regenerative energy production,” Hartung said.
In the heat pump business alone, Bosch will invest another 300 million euros over the next three years. Overall, the group, which now has more than 400,000 employees, intends to keep research and development costs high at € 6.1 billion last year. Despite 3,500 employees in three factories, Russia plays a subordinate role as a market for Bosch.
Moreover: Bosch boss warns against Germany’s withdrawal from Russian gas supplies.