Page 14 - RusRPTNov22

European car production could fall by as much as 40%, or more than 1mn vehicles, per quarter through the end of 2023, as a result of the energy crisis, S&P Global Mobility said in a report entitled “winter is coming” released on October 11
Soaring energy prices are driving an increasing number of European industries into loss. As bne IntelliNews reported, Europe’s industry is shutting down. Energy intensive business such as metal, fertiliser and petrochemical concerns have already begun to reduce production or stopped work completely after gas and energy prices increased ten-fold this year.
Automotive production is key to several economies in Western and Central Europe that employ thousands of people. Exacerbating the problem is many Western economies are already in recession, or are about to go into recession, killing off demand for new cars. In a bleak prognosis, the IMF predicted that a third of the world’s countries will go into recession in the next 12 months and that while this year’s crisis will be the worst since the 1970s, next year’s crisis “will be worse.”
S&P Global Mobility said the auto industry's supply chain was already in trouble after sever supply chain disruptions caused by the coronavirus (COVID 19) pandemic but had started to recover last year as the global economy bounced back. Now energy has risen to all-time highs the industry "may face extensive pressure" from soaring costs or even power cuts, the report said reports Reuters.
"With energy prices in Europe skyrocketing... a harsh winter could place certain automotive sectors at risk of being unable to keep their production lines running," the report said.
S&P Global Mobility said costs for car production have already risen to between €687 ($667) and €773 per vehicle, up from a pre-energy crisis level of €50. Previously the consultant forecasted European car assembly plants would produce between 4mn and 4.5-million units per quarter but has cut that estimate to as little as 2.75mn to 3mn units per quarter due to the energy crisis.
The slowdown will have global consequences as Europe exports car parts around the globe. Russia’s car industry has almost entirely collapsed as it was heavily dependent on European imports of key components. Russia’s car production fell 84% y/y post invasion, but has started to recover somewhat in the last few months, but was still down 62% y/y in August. Russian carmakers have already begun to drop some features like airbags due to the lack of components after sanctions and self-sanctioning regimes came into effect.
For individual countries across Europe, the auto forecaster looked at six factors including the size of a country's deficit, debt relative to gross domestic product, level of energy self-sufficiency and gas storage, Reuters reports.
While automotive powerhouse Germany has relied on Russian gas and is phasing out nuclear power, it has "more budgetary headroom to ride out the energy storm" than some other European countries including Italy, the report said, adding that European Original Equipment Manufacturers (OEMs)
14 RUSSIA Country Report November 2022 www.intellinews.com