Energy prices and security of supply: Germany lacks competitiveness

The massive increase in energy costs significantly affects companies in the automotive industry. The biggest challenge at the moment is the massive rise in electricity prices. This is shown by a current survey by the German Association of the Automotive Industry among automotive suppliers (manufacturer group III) and manufacturers of trailers, bodies and buses (manufacturer group II), which was conducted from September 2nd to 9th, 2022. 103 companies took part in it.

This means that the VDA has representative statements on the current situation and prospects for the automotive industry.

After the electricity price, of which 95% of the companies stated that it currently weighs heavily (28%) or even very heavily (67%) on them, the gas price represents the second greatest challenge. For 81% of the companies it is a very strong (52%) or strong stress (29%). For more than half of the companies, energy costs have risen by at least 50% this year, and for 41% of companies, energy costs have even at least doubled. More than two thirds of all companies are pessimistic about the coming year with regard to energy costs: Two thirds expect significantly higher energy costs for 2023.

In addition to the prices, another problem is emerging: companies sometimes do not receive a follow-up contract from their electricity and/or gas supplier. One in ten companies stated that they themselves were affected.

Another 10% stated that their company's suppliers do not receive a follow-up contract.

Investments are suspended

As a result of the extremely high energy costs, there are already production restrictions in 10% of the companies. And for almost a third (30%), production restrictions are currently being discussed. It is therefore not surprising that 85% of companies consider Germany as an internationally uncompetitive location in terms of energy prices and security of energy supply. This also has an impact on investment intentions: only 3% of companies want to increase their investments in Germany. In contrast, 22% want to shift investments abroad. 53% postpone or cancel their planned investments.

When asked about the effects they expect on the company's liquidity in the coming months, 10% of the companies replied that they were already suffering from liquidity problems. A further 32% expect persistent, significant liquidity problems in the coming months. Only every fifth company expects no impact on its liquidity.

VDA President Hildegard Müller: "The situation, especially for medium-sized companies in the automotive industry, is becoming increasingly dramatic. The issue of energy costs belongs at the top of the political agenda."

Müller continues: "The extension of the energy cost containment program to small and medium-sized companies recently announced by Federal Minister Habeck is correct in general, but it is essential that non-energy-intensive companies are also taken into account if the aim is to prevent value chains from being cut off. Anyone who only keeps an eye on the energy-intensive sectors is acting short-sightedly."

Arndt G. Kirchhoff, Chairman of the Advisory Board of the KIRCHHOFF Group, VDA Vice President and Chairman of the VDA SME Group, underscores the difficult situation: "The automotive SMEs are up to their necks in water. For many, it is about entrepreneurial existence. The companies now urgently need quick help with no red tape, otherwise the lights will soon go out for many medium-sized companies."

And Müller adds: "In the current situation, relieving the symptoms is no longer enough. The cause has to be tackled, energy costs have to go down. The supply side urgently needs to be expanded as much as possible. In addition, reducing the electricity tax to the European minimum is long overdue."