Soaring Energy Costs Could Cripple Europe’s Car Manufacturing Industry

Europe’s energy crisis and soaring energy costs for the industry could result in Europe-based auto manufacturers losing up to 1 million units of production per quarter between this quarter and the end of 2023, S&P Global Mobility said in a new report on Tuesday.

The energy-intensive auto manufacturing sector in Europe faces additional pressure from soaring energy costs in the coming months, on top of supply chain issues with semiconductors that started with the COVID pandemic, wrote Calum MacRae, Director, Supply Chain & Technology, at S&P Global Mobility.

In a worst-case scenario with potential restrictions on energy supply, quarterly production of cars in Europe could be as low as 2.75 million -3 million units, compared to an earlier forecast from S&P Global Mobility and S&P Commodity Insights of quarterly production in the 4 million -4.5-million-unit range through the end of 2023, which would have been moderate growth. 

“Upstream supplier parts production constraints could impact OEM volumes. As a result, we see a risk of OEMs halting shipments of completed vehicles due to shortages of single components, which are not necessarily coupled to country-level energy policies,” said Edwin Pope, Principal Analyst, Materials & Lightweighting, at S&P Global Mobility.  

The automotive industry in Europe would be the latest energy-intensive sector hit by sky-high energy prices.

Soaring energy prices have prompted a wave of aluminum capacity cuts across Europe as smelters reel from sky-high gas and power prices while demand remains soft due to concerns about global economic growth.

Due to the high energy costs, the European metals industry last month called on the EU for emergency action to prevent a collapse of the sector which faces an existential threat from surging power and gas prices. 

The fertilizer industry is also suffering from natural gas prices 15 times the pre-crisis level, 10 times more than the U.S. prices, and well above the prices in Asia, the Fertilizers Europe group says.  

By Tsvetana Paraskova for Oilprice.com

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