Volkswagen AG confirmed on Thursday that it may decide to pull its manufacturing out of Germany and Eastern Europe should the ongoing natural gas shortage continue. According to the auto manufacturer, withdrawing production from the region is one feasible option over the medium term to curb the effect that the European energy crisis has on the company.
Geng Wu, Volkswagen’s head of purchasing, elaborated on the company’s potential paths forward. “As mid-term alternatives, we are focusing on greater localization, 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.”
Europe’s natural gas shortage was sparked by the Russia-Ukraine war, with the European Union placing sanctions on Russian imports which it had heavily relied upon. While Germany has managed to achieve its goal of lifting gas storage levels to 90% ahead of the winter, there are concerns about how the country and its neighbors will replenish these reserves once depleted without Russian supplies.
According to a Volkswagen spokesperson, production may be shifted to Southwestern Europe or coastal areas in Northern Europe, where there are ports providing access to seaborne liquified natural gas (LNG). The automotive giant already operates car factories in Spain, Portugal, and Belgium, all of which are countries that operate LNG terminals.