Volkswagen AG warns of possible relocation of production from Germany

Southwest Europe or the coastal regions of northern Europe, which have better access to LNG supplies from the sea, could benefit from a shift in production, a Volkswagen spokesman told Bloomberg by phone. 

Volkswagen already operates car factories in Portugal, Spain, and Belgium. These countries have LNG terminals and are not as dependent on Russian gas supplies.

Relocating production from plants in Germany to other European locations would pose considerable difficulties. Around 295,000 people work in German VW plants. The employee representatives there make up around half of the 20-strong Supervisory Board.

As a medium-term alternative, the company is initially “focusing on greater localisation, relocation of production capacity or technical alternatives, similar to what has been done in the context of challenges with semiconductor shortages and other supply chain disruptions”, Bloomberg quoted Geng Wu, head of Volkswagen’s procurement division, as saying in a statement.

Even if the gas supply in the VW plants is currently secured, the company has identified potential energy savings at its European locations, according to Michael Heinemann, Managing Director of VW Kraftwerk GmbH. It’s about a “mid-double-digit percentage”, Heinemann told Bloomberg.

However, the automaker is concerned about the potential impact of higher energy prices on its suppliers. The group sees politics as being responsible here. According to Thomas Steg, the Volkswagen Group’s General Representative for External Relations, it must “curb the current uncontrolled explosion in gas and electricity prices”, as reported by rnd.de.

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