Bosch is investing 500 million euros in green hydrogen

Green hydrogen is considered by experts to be an important building block for the success of the energy transition. It is produced using the electrolysis process from renewable electricity, for example from wind and sun. Water is broken down into its components oxygen and hydrogen with the help of electricity.

For Hartung, regeneratively produced hydrogen is a key to the success of the energy transition as a supplement to electromobility. Experts currently see the greatest need in industry, shipping and aviation. Wherever the use of a battery is more expensive or difficult to implement.

Bosch has also increased its existing investments in fuel cell technology to one billion euros. The know-how already acquired is now to be used in hydrogen production. As in the fuel cell, the stack, i.e. the stack of several hundred individual cells, also forms the central element in the electrolyser. In each of the cells connected in series, water is converted into hydrogen and oxygen with the help of electricity – in reverse to the fuel cell, in which hydrogen and oxygen are used to generate electrical energy.

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So that everything works, the systems are peppered with control units, power electronics and sensors from Bosch. However, if there are gaps in its own know-how, the Group also works with development partners, as is the case with fuel cells.

High gas prices are now making green hydrogen economical more quickly

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 issues is now becoming increasingly important for the company.

Actually, green hydrogen from renewable energies should only be competitive in a few years. Because hydrogen from renewable energies was more than twice as expensive as hydrogen from fossil natural gas, experts only expected a breakthrough for the future technology in five to ten years.

But the Ukraine war accelerated the change significantly. Since the gas price has risen to a new record level and will remain high for the foreseeable future, sustainable hydrogen is now paying off much faster than expected – and could thus significantly accelerate the ramp-up of the hydrogen economy.

Bosch has now quickly picked up on this development. Based on EU calculations, the Swabians expect the demand for green hydrogen to increase rapidly to around ten million tons a year by 2030. At that point in time, Bosch expects the electrolyzer component market to have a 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 Nucera name. 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 good three billion euros in climate-neutral technology such as electrification and hydrogen over the next three years. The systems should be combinable as modules and used both in small systems with an output of up to ten megawatts and in large systems with a power output of gigawatts. Rapid industrialization is intended to reduce costs. First deliveries are planned for 2025.

The systems are to be controlled via the cloud. To ensure that such projects at Bosch run in a network, Hartung announced major investments in the digitization of the foundation company – ten billion euros alone in the next three years.

Meager returns in the automotive core business

Business at Bosch was better again last year. With sales increasing by a tenth to 78.7 billion euros, the operating result improved from 2.8 to four percent of sales. But the new head of finance, Markus Forschner, sees the earnings situation threatened again. Although sales will increase by six percent this year, as forecast, also due to inflation, among other things, the return is likely to be below the previous year’s level.

The problem child is business with the auto industry. The Mobility division, the largest division, managed to return to the black last year, but the result was only a meager 0.7 percent EBIT return. ZF, the second-largest German automotive supplier after Bosch, has achieved around five percent.

Bosch, with its extremely high proportion of electronics, was obviously hit harder by the semiconductor crisis, also because the group supplies the production of volume models. In view of the lack of chips, the car manufacturers preferred to install the available semiconductors in the high-margin top models. In addition, the high-yield diesel technology, one of Bosch’s main sources of income, is in less and less demand.

And the pressure is increasing. “Bosch will also have to pass on the significantly increased raw material, semiconductor and logistics costs to its customers,” explained division head Markus Heyn in the direction of the car manufacturer. “Only then can we continue to operate our supply business for the automotive industry profitably.” Car manufacturers such as Mercedes had shone in the first quarter with double-digit returns.

Confrontation with the car manufacturers is imminent

The industry is now threatened with tough disputes. Because even the market leader Bosch cannot afford such numbers in its core business in the long term. And not every automotive supplier operates from such a strong position and, if necessary, has the ability to compensate by other corporate divisions. Mahle, after all a company with a turnover of ten billion euros, recently asked the car manufacturers to help with the crisis.

The signs between car manufacturers and suppliers are stormy. As a rule, the subsequent improvement negotiations do not take place until the second half of the year. After the still stable demand for cars in the past year, demand for vehicles has plummeted in recent months, especially in Europe.

According to Hartung, Bosch has received orders for electromobility worth ten billion euros, but the margins there are usually smaller than in combustion technology, and more competitors are entering the market. The transformation is now entering its decisive phase.

In addition to car components, Bosch also manufactures household appliances, power tools, industrial and building technology. Hartung is hoping for a balance from 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 can be the reason for more determination, be it in the promotion of energy-efficient building renovation or the massive expansion of regenerative energy production,” said Hartung.

In the heat pump business alone, Bosch will invest 300 million euros over the next three years. Overall, the group, which now has more than 400,000 employees, intends to keep its research and development costs high at 6.1 billion euros last year. Despite 3,500 employees in three plants, Russia plays a subordinate role as a market for Bosch.

More: Bosch boss warns against German withdrawal from Russian gas supplies.