00:00 German manufacturers are gearing up for increased demand, and new factories are needed.
00:08 Stiebel Eltron has big plans for its production site in Lower Saxony.
00:12 "Some of the old buildings you can see here behind me will be torn down.
00:17 Others extended, others rebuilt.
00:19 We'll also be moving the entire staff parking lot and constructing a new cylinder factory.
00:24 There'll be a new logistics center.
00:27 Construction is already underway."
00:30 Stiebel Eltron is keeping production in Germany, but many of its rivals, including Phyland,
00:35 are shifting manufacturing to Eastern Europe.
00:38 The company has plants in Germany, France and the UK, and is now constructing a new
00:42 one in Sienice, Slovakia.
00:45 Spread over 100,000 square meters, it's costing the company over 200 million euros.
00:52 The industrial zone on the outskirts of the town is huge.
00:56 According to local media reports, the development was subsidized by the state to the tune of
01:00 20 million euros, with the investor also granted a reduction in income tax.
01:07 In the town hall, the mayor would rather not discuss the details.
01:11 "The permits that the company needed were granted quickly.
01:20 The authorities responsible are all local.
01:24 That's why things were done so quickly.
01:28 Of course, all legal requirements were observed."
01:37 Economist Zuzana Zavaska has compiled a study on heat pump manufacturing hubs.
01:43 Her conclusion?
01:44 Central and Eastern Europe are becoming production strongholds.
01:49 A number of firms are also investing in Poland – Bosch and Dobromiertz, Fisman and Lenica,
01:57 and the Japanese manufacturer Daikin and Lodge.
02:01 They're all building new heat pump factories for more than 200 million euros each, creating
02:05 over a thousand new jobs apiece.
02:08 Then there's Phyland in Slovakia.
02:10 "Central Eastern Europe is very well positioned for this because it's close to the final
02:15 market and that's not only from the locational perspective but also it has very well developed
02:19 infrastructure making it quite smooth to shift goods to the final market and also in itself
02:25 represents a growing market.
02:28 So we have seen also in countries such as Poland, Czech Republic and Slovakia more and
02:32 more consumers demanding heat pumps.
02:34 So while most of these products will be exported, in itself the fact that it is an attractive
02:40 market also plays a role."
02:43 Is there a danger of Germany falling behind due to manufacturers basing their production
02:47 in Eastern Europe?
02:49 Not as far as Phyland is concerned.
02:51 The management says it's investing heavily in research and development at the company's
02:55 HQ in Remscheid, Germany.
02:57 This is where new heat pumps are designed and subjected to extensive testing.
03:02 "Over the last few years we've quadrupled the number of development engineers.
03:09 Our heat pumps are developed here from scratch until the time that they're ready to go
03:12 into series production."
03:16 Pumps are still mass-assembled in Germany too.
03:19 But the new factory in Slovakia means Phyland can double its production to around half a
03:23 million units per year.
03:26 There would have been no space for a new facility in built-up Remscheid.
03:30 Expansion here is limited to a small production hall for making all the electronic parts.
03:36 So at least the brains of the heat pumps, the electronic control units, will continue
03:41 to be made in Germany.
03:46 Among managers, Slovakia is still seen as a low-wage market, despite wages rising rapidly
03:52 there too.
03:54 "What motivated us to build a plant in Slovakia wasn't labor cost advantages.
04:00 It was the faster approval times there.
04:04 So in 2020 we made the decision to build.
04:08 Then we went through a similar process to what you have in Germany, also including environmental
04:12 audits, except that we got approval a year later."
04:18 Which is significantly quicker than in Germany.
04:22 Programs for curbing emissions from heating systems have sparked enormous investments
04:26 across Europe, giving a boost to the mass production of heat pumps.
04:31 (upbeat music)
