There is no end in sight for problems faced by German car makers as cuts in Russian gas production, as a result of the Ukraine war, threatens more production cuts. Following on from the pandemic, global supply chain issues and the shortage of semi-conductors, this is the latest blow to the vehicle manufacturing industry. 

The German government has asked all of its manufacturing sectors to reduce gas use. However, there are only so many efficiency savings that can be made and it is difficult to see how this can now be achieved long term without restricting production. Mercedes-Benz and BMW are thought to be the companies worst affected. 

Car making is an energy intensive process and currently relies heavily on gas supplies from Russia. However, with these becoming more restricted, car makers are attempting to switch to coal and oil. However, this requires a change in government regulations on emission, which is proving to be a slow process.  Long term car makers want to move to renewable energy sources, but this takes time and major infrastructure investment. There are also question marks over whether the German electricity grid could handle such a change. 

At present car makers are in negotiation with the government to plan for restricted gas use. This is likely to involve compensation deals that allow manufacturers in all sectors to claim for lost production. Car makers are also keen to ensure that gas restrictions have a market neutral impact on the industry.