How the war is impacting the auto industry

The crisis in Ukraine has caused disruptions at some auto assembly plants and prompted companies to suspend shipments to Russia.

As if the coronavirus pandemic and the global semiconductor crisis were not enough, the car industry is now suffering from the war in Ukraine.

Russia’s invasion of Ukraine is causing ripple effects in the automotive supply chain. The attack also has prompted companies to stop shipping to Russia or suspend operations there. This could reduce global production of new cars and trucks by millions of units this year, according to experts.

Local Russian production is expected to feel the greatest near-term impact as companies suspend operations, but officials say the longer the war continues, the higher the risk of ripple effects across the automotive industry. The crisis could worsen rising inflation and propel already record-high vehicle prices even higher.

Mercedes says $2.2 billion at risk as Russia weighs expropriation. Mercedes-Benz has about 2 billion euros of assets in Russia that could be at risk if Moscow decides to expropriate the property of foreign companies that leave the country over its invasion of Ukraine. Also the other OEMs have the same issues with their facilities and business in or with Russia. Important members of automotive industry warned that a prolonged war risks being “very much worse” for the European economy than the coronavirus pandemic and may lead to huge price increases, scarcity of energy and inflation.

Several factories in Europe have suspended operations or are about to do, the lack of raw material being one of the main factors that led to this. The Volkswagen Group will accelerate production at its Wolfsburg factory from next week, after the facility was idled because of parts shortages resulting from the Ukraine war.  Another division of VW, Skoda Auto, the largest Czech exporter, has stopped production of the ENYAQ iV electric model and warned that there are risks to other models due to the lack of wiring from Ukraine.

BMW previously stopped production of BMW and Mini vehicles entirely in several factories around Europe because parts could not be delivered. Ferrari has suspended exports to Russia due to its invasion of Ukraine. Ford has suspended its joint-venture (JV) operations in Russia, the company has a minority stake in truck builder Sollers and produced around 20,000 trucks in Russia last year. General Motors has suspended some business in Russia, the American firm will stop all exports to Russia. Honda halted exports of cars and motorcycles to Russia, the Japanese firm doesn’t have any factories in the country. Renault has suspended business operations in Russia almost immediately after restarting production in its plant in Moscow. The French car maker suspended production of cars including the Renault Captur and Arkana, as well as several models from the Dacia line-up, including the Duster and Sandero. Tesla will support employees who are conscripted into the Ukrainian military forces with at least three months of pay. The US EV manufacturer will assess the impact of Russia’s invasion of its neighbouring country in three months. Volvo became the first automotive brand to take action in the midst of Russia’s invasion of Ukraine, suspending car shipments to the country until further notice. Volvo said it made the decision because of “potential risks associated with trading material with Russia, including the sanctions imposed by the EU and US”. Suzuki’s Hungarian factory has suspended car exports to both Ukraine and Russia following the war unfolding in eastern Europe. 

It is important to be known that for car manufacturers, one of the concerns in the supply chain created by the conflict in Ukraine is the palladium, platinum and rhodium metals used in catalytic converters for exhaust gas cleaning. Specifically, Russia produces about 38% of the world’s palladium, excluding recycled materials.