S&P Global Mobility issued a report this week predicting that as energy prices in the EU skyrocket and the energy infrastructure teeters on the brink of shortages, a harsh winter could shut all production at European automakers.
Th report is titled, “Winter is Coming,” and it notes that the “combined black swan events” of the Covid pandemic and the war in Ukraine have merged to stretch supply lines already in the automotive sector, especially among semiconductors. Now it predicts that going forward, the industry “may face extensive pressure” from the energy crisis in Europe in the coming months.
Quarterly production from auto manufacturing plants in Europe during the fourth quarter of 2022 through 2023 is predicted to be between 4 and 4.5-million-units per quarter. However the report predicts that could drop to as low as 2.75 million units per quarter “with potential utility restrictions.”
The report goes on to predict that with mandatory energy rationing, it should be expected there will be significant supply chain disruptions from November through spring.
It said, “For an industry already struggling with low inventories of vehicles in dealer showrooms, an additional crisis could be incapacitating on a global scale.”
Edwin Pope, S&P Global Mobility principal analyst for materials and lightweighting, noted, “If you look through the supply chain – particularly where there’s any metallic structure forming through pressing, welding or extrusion – there’s a tremendous amount of energy involved. Total energy usage in these companies could be up to one-and-a-half times what we’re seeing in vehicle assembly today. Anecdotally, we’re hearing that some of this manufacturing capacity is becoming so uneconomic that companies are simply shutting up shop.”
He also noted the report predated the damage to the Nord Stream 1 and Nord Stream 2 pipelines last month. Pope warned, “Events like that will inevitably shift the scales towards the lower end of what we have predicted, especially in terms of how long it takes to repair things of this nature.”
