German Companies Face Stiff Competition on Global Market for Energy-Efficient Technologies

German companies are well positioned on the global market for energy-efficient technologies. Against the backdrop of an assessment of the Federal Environment Agency, according to which the volume of this global market will reach one trillion euros (1,000,000,000,000) until 2020, this is a valuable asset. German companies, however, face stiff international competition. The Centre for European Economic Research (ZEW) conducted a study on the sub-market for energy-efficient refrigerators, where Germany has held the top position. The results of the study show that foreign manufacturers, especially from Turkey, are catching up in terms of energy-efficient technology.

Thanks to their low power consumption, energy-efficient technologies help to save money and protect the climate. At the same time they constitute a competitive edge for companies employing them. Over the past years, particularly German firms have been able to realise first-mover advantages in energy-efficient technologies, since Europe has been a trailblazer regarding energy efficiency standards. These standards gave the impulse for the production of innovative, energy-efficient goods for the German and European market, which were soon also demanded by those non-European countries which attach great importance to energy-efficiency, too.

This observation constitutes the basis for the Lead Markets Concept used in the ZEW study to examine Germany’s position as a production location and market for energy-efficient refrigerators, and to identify potential competitors on the world market. Lead markets are characterised by the successful first establishment of an innovation before it spreads to other countries. Germany clearly plays a pioneering role in developing and producing energy-efficient refrigerators. The German market displays all characteristics of a lead market: relative price and demand advantages, a good reputation of the country as a developer of complex technology, export advantages as well as an innovative and pro-competitive market structure. Further basic market conditions were taken into account, including environmental regulation and supply conditions, for instance the research infrastructure. Germany has the top position on the lead market for energy-efficient refrigerators, South Korea and Italy rank second, Denmark and France rank third and fourth.

Rivals of the German producers of energy-efficient household appliances are not only coming from Europe and the Far East. Companies from Turkey have joined the competition. Turkish manufacturer Arçelik, for example, used to have a reputation as a producer of less expensive white goods, but has launched surprisingly innovative, eco-efficient appliances under the brand name BEKO in recent years.

Interestingly, Turkish companies are catching up although there is no demand for energy-efficient, considerably more expensive technology on the domestic market in Turkey. This development confirms that orientation to the lead market can be a promising innovation strategy for second movers, even if a company’s country of origin does not offer favourable conditions for the introduction of innovative technologies.

The world market for energy-efficient refrigerators, electric cookers, microwaves and other household appliances certainly represents a worthwhile target. According to the Federal Environment Agency, this market has a volume of approximately 105 billion euros per year. Germany accounts for about nine per cent of the global turnover with expected annual growth rates of three per cent until 2020. Measured against the number of patents for energy-efficient household appliances granted worldwide, Germany ranks second with 26 per cent behind South Korea with 30 per cent. Italy (13 per cent), the US (nine per cent) and Japan (five per cent) are far behind regarding the share of worldwide patens.

The study titled "Lead Markets for Energy Efficient Appliances – The Case of Refrigerators!" was conducted by ZEW in collaboration with Prof. Thomas Cleff from Hochschule Pforzheim University. It is part of the project "Lead Market Strategies: First Mover, Early Follower and Late Follower" financed by the Federal Ministry of Education and Research.

For more information please contact

Dr. Klaus Rennings, Phone +49 621/1235-207, E-mail rennings@zew.de