tire production
Tire manufacturers depend on process heat and thus have increased gas and electricity consumption.
(Photo: dpa)
In the automotive industry, the burden of energy consumption is very unequally distributed. This is the conclusion reached by the rating agency S&P. In a current study, S&P compares the electricity and gas consumption in megawatt hours to the total turnover in order to determine the energy intensity of the companies. It turns out that car suppliers are three times more energy intensive than car manufacturers.
Tire manufacturers stand out in particular. The French group Michelin and the Italian competitor Pirelli, which generate a large part of their sales with tire products, have by far the highest energy intensity among the suppliers. Continental follows in third place. At Bosch, ZF and the French supplier Faurecia, the energy intensity is significantly lower.
Tire production is particularly energy-intensive and the high energy costs in Germany would put a heavy strain on the entire industry, a spokeswoman for Michelin said. Competitor Continental consumed a total of around nine terawatt hours of energy last year, with electricity and gas accounting for a large proportion of this. In terms of variable costs, the tire division causes the highest energy costs at Continental. The proportion is around five percent. The car components division, on the other hand, has a lower share of energy costs in the company.
Continental is therefore anticipating additional costs of EUR 3.5 billion in the current fiscal year due to the massive price increases for raw materials, preliminary products, energy and logistics. Almost two billion euros of this is attributable to the tire business alone.
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The higher energy costs do not cause difficulties for the Dax group. But the fact that the energy-hungry tire division, of all things, is exposed to a higher burden due to rising costs is depressing the group’s overall earnings. Because the car components division is currently making losses and is dependent on high investments due to the transformation. These are financed, among other things, by the income from the tire division.
Auto industry works off record order backlogs
According to the German rubber association wdk, the production-relevant costs in the main product groups of rubber items have increased by more than 60 percent since 2019. “In the first half of 2022, this is offset by an increase in sales of just one percent – with sales volumes roughly at the previous year’s level,” says wdk chief economist Michael Berthel. This discrepancy makes it clear that the companies in the industry would largely have to cope with the additional costs themselves – a situation that could not be endured much longer.
S&P is not quite so pessimistic about the situation. In the short term, the effects would be limited, since car manufacturers and suppliers still have to work off record high order backlogs as a result of the corona crisis and the lack of semiconductors. These orders are likely to keep the industry afloat through 2022 and into the first half of 2023, according to the rating agency.
It is also unlikely that car manufacturers in Europe will have to interrupt production due to possible energy shortages and higher prices, because energy costs for car manufacturers account for just one to two percent of total sales on average.
Nevertheless, there is a possible threat to European car production due to the higher energy dependency of the suppliers. “While energy availability is not a direct concern for automakers, it could still pose a risk to European auto production through the supply chain,” S&P reports in the study.
Car manufacturers are therefore already beginning to source components from their suppliers in countries that are less threatened by potential energy shortages. This is not a problem for large companies such as Continental, Bosch or ZF with their worldwide production network. However, this is a risk for strongly regionalized suppliers, as they only operate few or no plants outside of Europe.
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