Germany's Mittelstand Battery problems threaten success of forklift firm

Jungheinrich has been making electric forklift trucks for 60 years. Demand is still strong but it faces a two-pronged problem: future battery supplies and increasing competition from automakers.
Quelle: dpa
Raising the bar.
(Source: dpa)

Germany’s vehicle makers are notorious for having arrived at the e-mobility party very late indeed, with most now scrambling to make up lost ground against agile new rivals such as Tesla. Yet one Hamburg-based engineer has been specializing in battery-powered vehicles for 60 years, giving it a distinct advantage over the likes of VW, Daimler and BMW. The one difference: Jungheinrich makes forklift trucks, not cars.

Last year, 95 percent of its forklifts were electric, with 5 percent powered by lithium-ion batteries and the rest fitted with conventional lead acid batteries. But that marks significant growth in the technology at the core of most electric cars: Jungheinrich’s sales of lithium ion vehicles reached some 5,800 units in 2017, a 10-fold increase in just two years, even though they are far more expensive.

But now the warehouse supplier, which is the world's third-largest producer of forklifts and is listed on Germany’s MDAX mid-cap index, faces the same dilemma as the auto industry. The lithium-ion cells come from a limited number of suppliers in South Korea, Japan and China, meaning Jungheinrich, like Germany’s automakers, must rely on foreign suppliers.

The prevailing opinion is that industry shouldn’t make itself dependent on battery cells from Asia. Falko Schappacher, battery expert, Münster University

This situation is unlikely to change any time soon. Last week, German engineer Bosch, the world’s biggest automotive supplier, announced it was giving up plans to develop its own next-generation battery cells, saying the investment would be too risky. If even Bosch throws in the towel, a mid-sized, family-controlled company like Jungheinrich needn’t even bother trying.

“The prevailing opinion among scientists and politicians is that industry shouldn’t make itself dependent on battery cells from Asia,” said battery expert Falko Schappacher, from Münster University. Scientists have long been calling for battery cells to be made in Europe, “but it appears that European companies want to preserve their flexibility and would currently prefer to opt for the low-cost offers from Asia,” he said. The risk is that Europe’s auto industry will gradually lose core expertise as a result.

“At the moment there’s no alternative in Europe, although I would like to have one,” said Jungheinrich CEO Hans-Georg Frey. But he said the risk of becoming overly dependent was limited because his firm bought cells from a range of suppliers in Asia. He added that they also have a degree of dependence because they need to find buyers and prices were likely to fall significantly in the coming years.

Meanwhile, Jungheinrich is riding a surge in demand and expects sales of lithium-ion forklifts to reach well over 10,000 in 2018. From the middle of this year it will start installing a new type manufactured exclusively for it, Handelsblatt has learned.

Mr. Fry’s aim is to reach sales of €4 billion by 2020, up from €3.4 billion in 2017. According to its latest results, released on Wednesday, that was an 11 percent rise on 2016, and the firm also increased net income by 18 percent to €182 million.

The target seems realistic, but the figures don’t reveal the whole picture. In addition to battery supply, Jungheinrich faces another challenge. Its forklifts may be selling well now but it could face mounting competition in the future from auto suppliers pushing into its market.

Auto analyst Ferdinand Dudenhöffer, head of the German CAR Institute at the University of Duisburg-Essen, said many potential new rivals were already good at Jungheinrich’s specialty, so-called industrial process control technology. “The cell is the core component. Laying wires around the cell is relatively easy to copy and everyone can do that,” he said. “A lot of companies are going into this area.”

But Mr. Frey, 61, who has run Jungheinrich for the past 11 years, remains confident. Growth, he says, is the key to research and development. The company is battling for market share with bigger rivals Toyota and Kion.

When they increase their research or marketing budget by 1 percent of sales, Jungheinrich has to do it threefold. “Otherwise you’re pushed out of the market.”

And he’s determined that’s not going to happen.

Anja Müller writes about family and small- and medium-sized firms. Stephan Scheuer is co-head of Handelsblatt's feature and people's desk. To contact the authors: [email protected], [email protected]