AUTO

Russia attacked Ukraine, causing a series of car manufacturers to suspend production

Not only struggling with the impact of the global semiconductor chip crisis, car companies are also affected by the conflict between Russia and Ukraine.

On February 24, 2022, Russian President Vladimir Putin launched a military campaign to attack Ukraine. This war quickly had a significant impact on car manufacturers.

After attacking Ukraine, Russia was punished by a number of countries around the world. On February 24, the US announced the imposition of export restrictions on Russia. This leaves companies in Russia inaccessible to goods such as electronic components, computers, semiconductor chips and aircraft parts. Currently, a number of car companies such as Volkswagen and Renault have had to plan to temporarily close factories or change shifts to find a source of replacement parts.

According to the consulting firm J.D. Power and LMC Automotive, global new-vehicle sales this year are expected to fall by 400,000 units from initial projections, to 85.8 million. Before the war between Russia and Ukraine, the world auto industry was also struggling with limited supply because of the impact of the global semiconductor chip crisis.

“The auto industry, with limited supply and rising prices globally, is now under additional pressure because of the gravity of the conflict in Ukraine,” said Jeff Schuster, president of industry forecasting. global automotive industry by LMC Automotive, said.

“Higher gasoline and aluminum prices are expected to affect customers’ willingness and ability to buy vehicles, even if supply improves,” Schuster added. “We have significantly reduced our predictions for Ukraine and Russia because of the escalating conflict between the two countries and the consequences related to sanctions on Russia.”

Russia’s attack on Ukraine could cause oil prices to rise to more than 100 USD/barrel. This will increase inflationary pressure on European and US consumers, according to Wells Fargo analyst Colin Langan. Mr. Langan said that although consumers are willing to spend more money than the manufacturer’s list price to buy new cars, persistently high gasoline prices will affect the recovery in the long run. on the long run of the industry.

Volkswagen Group announced it will suspend production at two plants in Germany for a few days because of the supply of parts from Ukraine is interrupted. Meanwhile, French group Renault will suspend some assembly lines at car factories in Russia next week because of a lack of spare parts. Currently, Renault has not stated which models it will stop producing at the plant in Russia. A Renault spokesman said only that this was the result of trucks carrying spare parts not being able to cross the border between Russia and neighboring countries.

Volkswagen Group has to suspend production at its factory in Russia
Russia attacked Ukraine, causing a series of car manufacturers to suspend production, including Volkswagen Group

Renault is one of the Western automakers hardest hit by the war between Russia and Ukraine. According to Citibank data, 8% of Renault’s earnings core comes from Russia.

“The production process was interrupted mainly due to tighter controls at the borders between countries. We were forced to change many previously established logistics routes,” a representative of Renault Russia said.

Similar to parent group Renault, domestic car maker Avtovaz may also have to suspend some car production lines at its factory in central Russia for a day because of a lack of electronic components. However, Avtovaz did not mention the cause of Russia’s attack on Ukraine.

Not only car manufacturers but also auto parts suppliers are affected by the war between Russia and Ukraine. For example, tire company Nokian or two auto parts companies Sumitomo Electric Industries and Valeo. Meanwhile, Ford is concerned that the war between Russia and Ukraine will affect the supply of rare metals such as palladium, platinum or rhodium. These are all rare metals used in car exhaust filters.

According to Mr. Mark Wakefield, director of consulting firm AlixPartners, Russia currently produces about 38% of the world’s palladium. “It is impossible to imagine the world auto industry without Paladium made in Russia,” Mr. Wakefield said. Of course, automakers won’t immediately face a shortage of palladium because there are still stocks in London, UK.

In addition, aluminum prices are now starting to increase because of the conflict in Ukraine, Mr. Wakefield said. The disruption of aluminum supplies from Russia will add further cost pressures to car manufacturers.

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