For 35 years, Dr. Rainer Balbach built automotive supply chains for Daimler AG Mercedes-Benz across Germany, India, Singapore, Egypt, and Russia. In this episode of Beyond Cost, Rainer Balbach tells Tset CEO Sasan Hashemi that the hydrogen versus electric debate misses the point entirely.
The technology isn't Europe's problem: we have world-class engineering for both. The problem is hesitation. While Europe debates which powertrain to back, China and other emerging markets learned fast, moved fast, and scaled fast.
"We missed the attitude to learn and be open," Rainer Balbach says. Europe has the technology. What we're missing is the entrepreneurial speed to scale it.
Economies of Scale: Why BYD Wins
When Sasan Hashemi asks about electric vehicles and the software-defined vehicle shift, Rainer Balbach points to a fundamental principle that European manufacturers forgot: it's all about economies of scale.
Tesla wasn't just building electric cars, but they were building a manufacturing system optimized for scale from day one. Chinese manufacturers like BYD didn't just copy the product; they learned the underlying philosophy and executed faster.
Technology leadership without execution speed means nothing.
What Europe Missed That Emerging Markets Did Not
Rainer Balbach spent decades building supply chains in emerging markets, from India to Singapore to Egypt. The pattern he observed is uncomfortable for European executives to hear.
Emerging markets understood that frame conditions matter. They adapted technologies to local conditions rather than trying to transplant European processes wholesale. They learned from everyone, Japanese OEMs, German engineering, American scale, and synthesized the best of each.
Europe, meanwhile, tried to export its entire system. When that didn't work, we hesitated instead of adapting.
Hydrogen vs Electric: Stop Debating, Start Asking About Use Cases
The hydrogen versus electric debate in Europe generates more heat than light. Rainer Balbach cuts through it with brutal clarity: stop treating this as an either/or question and start asking what each use case actually requires.
For passenger cars, the answer is clear. The infrastructure requirements, the energy losses in conversion, the actual driving patterns (none of it supports hydrogen). Most passenger car usage consists of short trips and city driving, not cross-country journeys requiring extended range.
"From my experience, in passenger cars, hydrogen makes no sense. When you look at your utilization of your car, where do you use it? Especially here in Vienna, can you use it at all? Rather not. For me, when I look at my daily driving experience, it's actually short driving only."
Even accounting for long-distance driving scenarios, the use case doesn't justify the infrastructure investment required. "On passenger cars: no hydrogen."
For trucks and commercial vehicles, the calculation changes entirely. But the answer doesn't come from engineers debating energy density and conversion efficiency. It comes from fleet owners calculating total cost of ownership.
"You need to listen exactly to the fleet owner. What is required? For instance, delivery of goods from storage to the final sales point, that last mile. The use case is really the major thing. You have to go through the total cost of ownership. You have to show the decision maker the final balance: what is the advantage?"
Long-distance freight moving goods from southern Europe to central Europe through routes like the Brenner Pass presents a different use case. Long distance, predictable routes, and centralized refueling at logistics hubs fit hydrogen's infrastructure requirements. Not because hydrogen is inherently superior, but because the use case supports it.
The trend Rainer Balbach observes among logistics companies reveals what actually drives adoption decisions: control over energy supply.
Fleet operators don't want to depend on third-party infrastructure. They want to manage their own energy costs and availability. Whether that's electric charging or hydrogen storage is secondary to the control it provides.
The Hydrogen Convention: What Europe Is Missing
Rainer Balbach recently attended a hydrogen convention in Linz, Austria, where 500 people from the hydrogen community gathered. His assessment? Europe has the technology. What we're missing is the commitment to scale it.
The hydrogen industry learned something from the battery electric vehicle rollout: infrastructure comes first. You can't scale adoption without solving the refueling/recharging problem. But Europe's approach remains tentative.
"Actually, we have perfect technology for everything. Everything is available. But we do not have economy of scales. We don't have the volume production. We don't have that in place, and we do not have sufficient infrastructure. That is slowing it down."
It's a management and politics problem, not a technology problem.
The Infrastructure Problem Nobody Wants to Discuss
Here's what's rarely discussed in debates about electric versus hydrogen: Europe's grid can't handle the energy we're already producing.
Rainer Balbach offers a striking example: "In Austria, you can produce double as much electrical energy compared to now, but the net is not able to digest that. What do they do? They switch off. Water energy plants: they just open the gates and let the water flow. Did you see any wind park fully operating when you drive with your car? They switch off the wind because it's too much for the net. Same with PV."
Europe is turning off renewable energy because we can't store it. The solution isn't just building more generation capacity. It's energy storage on site, at manufacturing facilities, at logistics hubs, at production sites.
"Therefore, the idea is to store energy at any time in storage systems. Low-cost storage containers. Energy storage on site will be key."
This changes the entire hydrogen versus electric debate. If you need on-site energy storage anyway, hydrogen becomes an energy storage medium, not just a vehicle fuel. The question shifts from "hydrogen or electric?" to "how do we integrate both into a flexible energy system?"
The Real Problem: Europe Stopped Promoting Entrepreneurs
Europe's manufacturing crisis isn't a technology problem or even a strategy problem. It's a cultural problem about who gets promoted and what behavior gets rewarded.
The controllers and consultants optimized for what could be measured. They built decision-making processes based on figures, based on facts and data. That works when the game stays the same. It fails when the rules change.
The contrast with other regions is stark. Rainer Balbach points to China, Korea, and especially Singapore (where he lived for four years) as places that maintained entrepreneurial behavior while Europe optimized it away.
"Singapore is a headquarters of innovations right now. What is ongoing in Singapore? It's a dream. It's a paradise. They are doing exactly what you are asking: saving money on one hand and using a big part of the money to put it in innovations. All those fellows, these are for me the entrepreneurs. This is my father, this is my grandfather. He did the same job: putting the money, the profit, also on risk elements. This behavior we have to reinvent for us in the future. Not only like in the big companies where everything is based on facts and figures. No, we need also risk capital. We need more risk capital. Risk enterprise owners."
Closing Thoughts
Near the end of the conversation, Sasan Hashemi frames the challenge perfectly: "All this prosperity and technology that we have is because we were like this. Otherwise, we wouldn't be here where we are. But sometimes you have to restart that engine again to stay on top."
Europe's innovation crisis isn't about technology. We have world-class engineering for both hydrogen and electric powertrains. We have proven manufacturing expertise. We have deep technical knowledge.
The crisis is about hesitation. While we debate hydrogen versus electric in committee meetings, other regions picked technologies, committed resources, and scaled. They moved fast, learned from failures, and iterated.
The technology for the future, whether electric, hydrogen, or hybrid, already exists. The business cases can be calculated. The infrastructure can be built.
What's missing is the entrepreneurial spirit that built Europe's industrial base in the first place. The willingness to commit, to risk capital, to move before every variable is optimized.
The question isn't hydrogen or electric. The question is whether Europe will stop debating and start executing before the window closes.
Listen to the Full Episode
Listen to the full episode to hear more about Rainer Balbach's experiences pioneering aluminum deep-drawing, building global supply chains from scratch, his four years in India, and why Singapore became a paradise for innovation while Europe debates in committee meetings.
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