German automakers may be forced to cut output due to gas shortages

BERLIN -- German companies including Mercedes-Benz and BMW, are attempting to reduce gas use in response to a government plea to spare reserves, but savings may be limited without production cuts, companies and industry associations across autos, chemicals and engineering told Reuters.

Switching from gas to other fuels, such as coal or oil as a short-term solution is possible for companies with burners on-site, but Berlin needs to help by speeding approvals for resulting higher carbon emissions, associations said.

Mercedes-Benz said it is now replacing its natural gas-fueled combined heat and power plants with green electricity, declining to specify what type.

BMW said it was already reducing its gas intake but further savings were only possible for a limited period without jeopardizing output.

"The entire industry must be taken into account and savings managed centrally in order to ensure neutrality in competition," a spokesperson for BMW said.

Bosch, the world's largest supplier, said it had lowered the temperature in offices and logistics spaces, as has Volkswagen Group's premium car brand Audi.

"These measures largely exhaust the potential for short-term energy savings," VDA president Hildegard Mueller. "Any further cuts would involve far-reaching interventions into production, with consequences for employees and suppliers."

VDA, Germany's car association, said others were also exploring a similar measure to switch from natural gas to green electricity - but if the entire auto industry made the switch, its electricity demand on the grid would rise up to 15 percent, it warned.

"Both options imply cost increases for industry and require a stable electricity grid as well as quick bureaucratic approval for fuel switching," Mueller said, referring to a switch to electricity from the grid or oil.

In its push to curb its reliance on Russian gas after Moscow's invasion of Ukraine, Germany has already cut the share of gas in its electricity production to around 6 percent this year from 15 percent last year and has permitted reconnecting coal-fired power plants to the grid.

Germany's gas-guzzling chemicals industry could lower gas consumption by 2 percent to 3 percent by fuel switching, national chemical industry association VCI told Reuters.

Germany's energy regulator, the Bundesnetzagentur, is currently assessing data from the country's 2,500 biggest industrial gas consumers on their needs and emergency reduction plans to set up a so-called "gas safety platform," due to go live in October.

The government will also allow large gas users to auction contracted gas volumes they will not use to stabilize the market.

Still, it is an open question whether any companies will have gas to spare, industry representatives contacted by Reuters said.

And given limits on fuel switching, more substantial gas savings were likely to require lowering production or shifting it abroad, they warned.

Whether companies would opt for cutting production to save energy would depend on the auction model and whether potential government compensation for gas savings outweighed the cost of production losses, VCI energy expert Joerg Rothermel said.

"One or the other product would no longer be produced, or perhaps bought somewhere else on the global market. We would be losing added value," said Matthias Zelinger, climate expert at German engineering association VDMA, said.

Germany's engineering companies could cope with 20-40 percent less gas in the short term but there has to be less red tape required to switch fuels, change shifts or reduce workplace temperatures, he said.

"We are losing time... this is the time to save and store gas to have enough stocks for winter," Zelinger said.