Automotive Industry's Strategies to Reduce Fossil Fuel Dependence
In the face of an impending energy crisis, automobile manufacturers are taking proactive measures to ensure the continuity of their operations. With potential production losses from Europe-based manufacturing plants exceeding one million units per quarter from Q4 2022 to 2023, companies are exploring various strategies to mitigate the impact.
The focus in Europe is shifting towards potential production losses due to the interruption of natural gas supply from Russia. In response, auto makers are considering reallocating vehicle production to coastal zones of Europe that have access to sea-transported gas supplies. This move could help maintain production levels and alleviate the strain on land-based resources.
However, the forecast for moderate growth in quarterly European light vehicle production may be significantly impacted by potential production losses. Quarterly European light vehicle production, which was forecast to be between 4 and 4.5 million units, may be reduced to 2.75-3 million units per quarter due to potential energy rationing.
To address this challenge, auto makers are not only considering geographical shifts but also making significant investments in renewable energy sources. Companies like BMW, Volkswagen, and Mercedes are dedicating billions of euros to new electric vehicle platforms and battery technology in Europe. BMW, for instance, has earmarked over 10 billion euros for their "New Class," while Volkswagen plans more than 100 billion euros for e-mobility and software. These investments include a broader strategy involving hydrogen and renewable fuels to reduce dependence on fossil fuels such as natural gas.
In addition to investing in electric and alternative fuel vehicles, auto makers are also looking at ways to reduce energy consumption in their production processes. Reducing the air sink rate, lowering the ambient temperature, and changing the airlock conversion function from fresh air to recirculated air are some methods being considered. Furthermore, reducing the time paint is kept hot is being considered as a method to account for up to 40% of gas demand reduction.
Decentralisation of heating processes and developing plans to transport hydrogen to production plants are being considered as medium-term actions. Auto makers are also making investments to produce their own energy as a medium-term action, with examining where to add solar panels being part of the strategy to increase energy efficiency and reduce natural gas consumption.
Auto makers are also investigating the replacement of natural gas-fuelled combined heat and power plants with green electricity, such as piloted electrically-operated heating stations for aluminium smelting. These efforts aim to further reduce the dependence on natural gas and contribute to a more sustainable production process.
While the potential impact of energy rationing on European light vehicle production has not been quantified in the given context, auto makers are exploring technical alternatives to mitigate potential production losses. The overall energy consumption from car production has been reduced by 23% over the last 15 years, indicating a positive trend towards more energy-efficient production methods.
As the situation continues to evolve, it is clear that auto makers are taking decisive action to adapt to the energy crisis and ensure the sustainability of their operations. These efforts not only aim to maintain production levels but also contribute to a more sustainable and energy-efficient future for the automobile industry.
