VW COULD MOVE PRODUCTION OUT OF GERMANY IF GAS SHORTAGE PERSISTS

BERLIN - Volkswagen could shift production out of Germany and Eastern Europe if a shortage of natural gas persists, the latest sign that the energy crisis unleashed by Russia’s invasion of Ukraine threatens to upend Europe’s industrial landscape.

Volkswagen, Europe’s biggest carmaker, said moving production was one of the options available for it in the medium-term if gas shortages last much beyond this winter.

The carmaker has major factories in Germany, the Czech Republic and Slovakia, which are among the European countries most reliant on Russian gas.

“As mid-term alternatives, we are focusing on greater localisation, relocation of manufacturing capacity, or technical alternatives, similar to what is already common practice in the context of challenges related to semiconductor shortages and other recent supply chain disruptions,” Geng Wu, Volkswagen’s head of purchasing, said in a statement.

Russia’s decision to throttle gas supplies to Europe has raised concerns that Germany might be forced to ration its fuel.

Recent news that gas storage levels hit 90 percent ahead of schedule has soothed fears of acute shortages this winter, but Germany faces a challenge in replenishing depleted reserves next summer without contributions from Russia.

German plastics maker Covestro AG isn’t expecting a gas shortage this winter but at the same time won’t make investments to grow in Europe because of the region’s high energy costs, according to Chief Executive Officer Markus Steilemann.

Growth markets are mainly in Asia, where prices are significantly lower, he said at a climate conference in Berlin.

Southwestern Europe or coastal zones of northern Europe, both of which have better access to seaborne liquefied natural gas cargoes, could be the beneficiaries of any production shift, a Volkswagen spokesman said by phone.