Stuttgart, Dusseldorf The war in Ukraine is disrupting supply chains, prices for raw materials are skyrocketing and the transition to electromobility is also becoming a financial achievement: in this difficult situation, Bosch boss Stefan Hartung has identified a new area of activity. The technology group will invest half a billion euros over the next eight years in the development of components for the electrolysis of hydrogen.
“We want to support the rapid development of hydrogen production in Europe with Bosch technology,” Hartung announced on Wednesday during the presentation of the annual report. The 56-year-old, who has led the group since January, calls such advances “deciphering the future”. With the hydrogen initiative, he is now setting the tone while continuing his efforts to make Bosch less dependent on the automotive business, which is currently under pressure.
Green hydrogen is considered by experts as a cornerstone for the success of the energy transition. It is produced by the process of electrolysis from renewable electricity, for example wind and sun. Water is broken down into its components oxygen and hydrogen using electricity.
Hydrogen: Bosch wants to become more independent with production technology
For Hartung, hydrogen produced regeneratively is a key to the success of the energy transition in addition to electromobility. Experts currently see the greatest need in industry, shipping and aviation. Wherever using a battery is more expensive or difficult to implement.
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Bosch has also increased its existing investments in fuel cell technology to €1 billion. The know-how already acquired will now be used in the production of hydrogen. As in the fuel cell, the stack, that is to say the stack of several hundred individual cells, also constitutes the central element of the electrolyser. In each of the series-connected cells, water is converted into hydrogen and oxygen using electricity – unlike the fuel cell, in which hydrogen and oxygen are used to generate electrical energy.
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To make everything work, the systems are dotted with Bosch control units, power electronics and sensors. However, if there are gaps in its own know-how, the Group also works with development partners, as is the case for fuel cells.
High Gas Prices Now Make Green Hydrogen Economical Faster
Annual investments of between 60 and 70 million euros in the new line of business seem manageable for a group with an equity ratio of 45% and liquidity in the tens of billions. But the push shows that investing in energy issues is becoming increasingly important to the company.
Indeed, green hydrogen from renewable energies should only be competitive in a few years. Because hydrogen from renewables was more than twice as expensive as hydrogen from fossil natural gas, experts did not expect a breakthrough for future technology for five to ten years.
Ukraine War: Hydrogen more attractive due to rising gas prices
But the war in Ukraine greatly accelerated the change. Given that the price of gas has reached a new all-time high and will remain high for the foreseeable future, sustainable hydrogen is now paying off much faster than expected – and could therefore accelerate the rise of Europe’s economy. hydrogen.
Bosch quickly picked up on this development. Based on EU calculations, the Swabians expect the demand for green hydrogen to grow rapidly to around ten million tonnes per year by 2030. By then, Bosch expects that the market for electrolyser components reaches a global volume of approximately 14 billion euros. The highest growth rates would be in Europe.
Other industrial giants such as Siemens Energy, Linde or Air Liquide have also recognized the potential and are massively expanding their smelter production facilities. Thyssen-Krupp recently announced that it would take its smelter division public under the name Nucera. The EU expects electrolysis capacities in Germany to increase from the current 1,000 megawatts to 40,000 megawatts by 2030.
Bosch intends to invest a good three billion euros in climate-neutral technologies such as electrification and hydrogen over the next three years. The systems should be combinable in the form of modules and used both in small systems with an output of up to ten megawatts and in large systems with gigawatts. Rapid industrialization aims to reduce costs. The first deliveries are scheduled for 2025.
Systems should be controlled through the cloud. To ensure that such projects at Bosch work in a network, Hartung announced major investments in the digitalization of the founding company – ten billion euros in the next three years alone.
Lean returns to Robert Bosch’s automotive core business
Bosch’s business improved further last year. With sales up by a tenth to 78.7 billion euros, operating profit rose from 2.8 to 4% of sales. According to the annual report, the net profit in 2021 was around 2.5 billion euros, after around 750 million euros in the previous year, which was strongly influenced by the corona pandemic. But the new financial director, Markus Forschner, sees the profit situation threatened again. As expected, sales will increase by 6% this year, among other things due to inflation, but the return should be between 3 and 4% and therefore below the level of the previous year.
The problem child is dealing 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 meager EBIT return of 0.7%. ZF, Germany’s second largest automotive supplier after Bosch, reached around 5%.
Bosch, with its extremely high proportion of electronics, has obviously been hit harder by the semiconductor crisis, also because the group provides mass model production. Given the lack of chips, automakers preferred to install the available semiconductors in high-margin, high-end models. In addition, high-efficiency diesel technology, one of Bosch’s main sources of revenue, is in less and less demand.
And the pressure is mounting. “Bosch will also have to pass on to its customers the significant increase in the costs of raw materials, semiconductors and logistics,” explained division chief Markus Heyn to the management of the automaker. “Only then can we continue to operate our automotive supply business profitably.” Automakers such as Mercedes shone in the first quarter with double-digit returns.
The confrontation with the automakers is imminent
The industry is now threatened with difficult disputes. Because even the market leader Bosch cannot afford such figures in its core business in the long term. And not all automotive suppliers operate from such a strong position and, if necessary, have the ability to compensate through other divisions of the business. Mahle, after all a company with a turnover of ten billion euros, recently asked automakers to help it deal with the crisis.
The signals between car manufacturers and suppliers are stormy. As a rule, subsequent improvement negotiations take place only in the second half of the year. After a still stable demand for cars last year, demand for vehicles has collapsed in recent months, especially in Europe.
Electromobility: Bosch with ten billion euros in orders
According to Hartung, Bosch has received orders for electromobility worth ten billion euros, but the margins there are often lower than in combustion technology, and more and more competitors are entering the market. . The transformation is now entering its decisive phase.
In addition to automotive components, Bosch also manufactures household appliances, power tools, industrial and building technologies. Hartung hopes for a balance of the currently more profitable divisions.
The Bosch boss 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 resolve, whether in promoting energy-efficient retrofitting of buildings or in the massive expansion of regenerative energy generation,” Hartung said.
In the heat pump sector alone, Bosch will invest an additional 300 million euros over the next three years. In total, the group, which now has more than 400,000 employees, intends to maintain its research and development costs at a high level at 6.1 billion euros last year. Despite 3,500 employees in three factories, Russia plays a secondary role as a market for Bosch.
After: Bosch boss warns against German withdrawal from Russian gas supply.