VW Already Preparing For The Next Big Industry Crisis

Aug. 31, 2022 12:26 PM ET by Jarryd Neves Industry News / 4 Comments

The German automotive group is getting its hands on all the automotive glass it can.

The past few years have been tough on most industries, including the automotive sector. COVID-19 threw a spanner in the works and forced myriad manufacturers to suspend production. After months of struggling, facilities rumbled into life once again, only to contend with the ongoing semiconductor chip shortage and crippling supply chain issues.

Even though it looks like the clouds are parting for motor manufacturers, The Wall Street Journal reports another storm may be brewing, as the Volkswagen Group is amassing vast amounts of automotive glass amidst a major shortage. The group is stockpiling side windows, windshields, and more, as the supply of the essential material is threatened by potential gas shortages.

So, how is it that a simple (but important) resource is in such scarce supply? It's all got to do with Russia's invasion of Ukraine. In response to Western trade bans and sanctions, Russia has reduced its natural gas supplies to Europe, which has seen the price skyrocket in recent months.

Producing glass requires plenty of heat, which is usually done with natural gas. The German automaker has reportedly begun buying up as much glass as it can get its hands on and has even looked to other markets where a looming shortage doesn't threaten supply.

The company's best-selling vehicle, the Tiguan, is built in Germany and exported to several key markets. If production of the compact SUV is hindered by a glass shortage, it could spell trouble for the ever-important bottom line.

Stockpiling glass (and components, in general) sits at odds with modern production methods. Modern assembly lines prescribe the "just-in-time" method, which frees up space and saves time. In theory, parts arrive when needed and are put to use immediately. However, as the past two years have shown us, there are downsides.

But it's not just car companies that are having to contend with a looming glass shortage. WSJ also reports that other businesses, such as breweries, are hoarding scores of glass bottles in preparation for the potential shortage. Of course, glass can always be sourced from other markets. But the effects of this will be passed down to the customer.

Vehicles are already prohibitively expensive, and increased raw material costs will only place more pressure on the consumer. Hopefully, Volkswagen's foresight will mitigate this.

It's not the first time the manufacturing conglomerate has been hit with supply chain issues in recent weeks.

Porsche's production boss Albrecht Reimold admitted that the sports car brand had been hard hit, with many models sitting on the factory floor awaiting completion. The unfinished vehicles are taking up crucial space as matrix headlights remain in short supply.

Interestingly, Audi has been looking into recycling broken glass and using it for future vehicles. While the project is still in its pilot phase, this could be another solution to the impending shortage.