European car industry in trouble – S&P

Inflation, supply chain issues and energy crisis weigh on output, says market data provider

With energy prices soaring in the EU, a harsh winter could shut down production in parts of the automotive sector, S&P Global Mobility reported this week.

According to a report entitled « Winter is Coming », the « Combined Black Swan Events » of the Covid-19 pandemic and the war in Ukraine have strained automotive supply chains, especially when it comes to semiconductors.

As a result, the industry « can cope with significant pressure » energy costs in the coming months.

From the fourth quarter of 2022 to 2023, quarterly production of European-based automotive manufacturing plants is expected to be between 4 and 4.5 million units. However, « with potential usefulness restrictions », that production could fall to 2.75 million units per quarter, the report said.

The researcher predicted major supply chain disruptions from November through spring, citing mandatory energy rationing for auto producers and suppliers in the region.

“For an industry already struggling with low vehicle inventories in dealer showrooms, an additional crisis could be crippling globally,” It said.

Edwin Pope, S&P Global Mobility Principal Analyst for Materials and Lightweighting, pointed out that “If you look through the supply chain – particularly where there is a metal structure formed by pressing, welding or extrusion – there is an enormous amount of energy involved.

“The total energy consumption in these companies could be up to one and a half times what we see today in vehicle assembly. Anecdotally, we hear that some of this manufacturing capacity is becoming so unprofitable that companies are simply closing up shop.

READ MORE: Industry stalls in the face of the energy crisis – Banque de France

He also told Reuters that the S&P Global Mobility analysis was conducted before the sabotage of Russia’s Nord Stream gas pipelines late last month. “Events like this will inevitably shift the scales down from what we predicted, especially in terms of the time needed to fix things of this nature,” The pope warned.

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