One in five German industrial firms plans production cuts due to energy costs

Almost a fifth of German industrial companies plan to reduce production due to high energy costs, a survey by the association of German Chambers of Commerce and Industry (DIHK) revealed. While 17 percent of companies said the energy crisis has forced them to cut production, eight percent said they were planning to relocate production. “The situation of our economy is dramatic – consistent crisis management and faster action are now absolutely necessary,” Martin Wansleben, the association’s managing director, said. Fifty nine percent of all companies said they were planning to largely pass on higher energy costs to clients, while 38 percent said they considered investments to increase energy efficiency.

The consequences of the energy crisis are particularly severe in the car industry, according to the survey. Forty three percent of carmakers and 49 percent of suppliers described their financial situation as problematic, a substantial increase since the last survey in early summer. Sixteen percent of carmakers have already cut production, and 17 percent said they were planning to relocate production abroad. Ninety five percent of companies in the sector said that high raw material and energy costs currently pose the largest risk to their businesses.

According to DIHK, energy prices paid by producers in September were 132 percent higher than a year ago. Both the government and Germany’s leading economic research institutes expect that the energy crisis will push Germany’s economy into a recession next year as rising prices put a damper on production and demand. Many German industrial companies relied on cheap Russian pipeline gas for their competitiveness before the war in Ukraine.