Author 丨 Shi Jie Ma Xifeng
Responsible editor 丨 Cui Liwen
Edit 丨 Chic
Car companies and auto consumers around the world, including China, cannot stay out of the way.
"Russia attacked Ukraine, the cost of building cars around the world rose, and the price of buying cars rose." This is not a joke.
As Russia destroys much of Ukraine's military capabilities and lands in Kiev, the United States and the European Union have announced new sanctions against the Russian economy. The European Union announced a freeze on all Russian assets in Europe, and the United States announced sanctions against Russian banks for up to $1 trillion in assets.
The Russo-Ukrainian war is no longer just a macro political topic, it may cast a shadow on the global automotive industry and related intelligent industries. Even if the vehicle company and parts suppliers are as far away as the United States, Europe, China and other Asia, they cannot escape the collateral impact of the supply chain.
After all, now that the auto industry is highly globalized, russia and Ukraine are embroiled in wars and economic sanctions as resources, and the pain will soon spread to the global manufacturing industry.
We need to anticipate levels of risk, shadows, and pain, and find our way through the haze.
01 Car prices generally rising?
Why does the Russian-Ukrainian conflict affect the global automotive industry? First of all, this mentions the status of Russia and Ukraine as resource exporters.
Russia is the world's largest supplier of a wide range of key metal materials, including precious metals such as palladium and nickel. These metal elements are precisely the necessities of the automotive industry in various countries.
Kitchen utensils, mobile phones, medical equipment, transportation, construction and electricity, as well as nickel elements used in lithium-ion batteries for new energy vehicles, Russia is an important supplier in the world; catalytic exhaust gas purifiers for purifying automobile exhaust gases require the use of precious metal palladium, and Russia accounts for more than 40% of the global supply. Whether it is a gasoline car or a diesel car, it needs an exhaust gas purification treatment system. The aluminium needed for automobiles, construction, machinery and packaging, Russia provides a quarter of the world's.
According to a statistic consulted by the C dimension, Russia accounts for a staggering share of global exports of metal resources: 49% of nickel, 42% of palladium, 26% of aluminum, 13% of platinum, 7% of steel and 4% of copper. The attacked Ukraine is not weak in palladium exports, bearing 35 percent of U.S. palladium supplies. It is clear that if Russia and Ukraine cut off supplies, it will put huge upward pressure on raw material prices.
According to Sam Abuelsamid, chief automotive analyst at Research Firm Guidehouse Insights, once russia engages in economic confrontation with the West and cuts off palladium export supplies, "automakers will have to look for alternative supplies [of palladium] or they will not be able to continue producing cars with internal combustion engines." ”
▲ Russia's exports of ferrous metals are growing
It is true that car companies can look for alternative sources, such as South Africa and Zimbabwe also produce large amounts of palladium, but these two countries cannot offset the impact of the Russian supply cut, because the price of palladium in the futures market has risen rapidly long before Russian forces attack Ukraine this week. In mid-December 2021, the price of palladium fell to $1,600 an ounce. By early 2022, that price was $1,750; by Feb. 23, the price had jumped above $2,400.
What impact will such a sharp increase in the price of palladium have on automakers and car buyers? According to calculations, the cost of each car will increase by $150, while SUVs, pickups and sports cars with larger displacement will increase by $200. Converted into RMB, the cost or price of each vehicle will be about 1,000 yuan (947 to 1,264 yuan) higher than the original. It may not seem high, but this is only the increase in costs due to a single factor, and there are more factors below that have the potential to increase the cost of producing and selling cars worldwide.
Who bears the extra costs? For car companies, they will be forced to decide whether to swallow the bitter fruit silently or pass the pressure on to consumers. The terminal price of new cars in the U.S. market has now reached a record high, with the average price of bicycles reaching $45,000 (about 284,000 yuan) in January 2022. What about Chinese consumers?
▲ Russia's exports of ferrous metals
Maybe the Chinese auto industry, which has a relatively independent supply chain, has been less affected, but after all, we can't get out of the global village, so if you look at the car, you have to pay more than a thousand yuan in a short period of time, and the long-term price increase may be more than this level, will you be happy?
If we consider that the Russo-Ukrainian war will affect the global economy through agriculture, energy and finance, then "costs rise, incomes fall", and the whole world is facing another huge pressure of economic crisis.
According to data obtained in the C dimension, Russia supplies about 30% of Europe's oil and 35% of natural gas, and the conflict has the potential to cause oil and gas prices to soar by 50-150%, and if oil prices rise from $90 to $175, the price of natural gas soars to $250, and the consequences are self-evident.
The deduction from the agricultural perspective is also quite bad. Russia and Ukraine are the world's first and fifth largest wheat growers, respectively, and the production of barley, maize, sunflowers and rapeseed will also be severely affected. Australia and other alternative countries can not fully replenish the loss, because 23% of the world's ammonia, 17% of potash fertilizer, 14% of urea and 10% of phosphate come from Russia, and although China has a huge supply of fertilizers, it is mainly used for domestic use. Once the war raises the cost of fertilizers and crop prices, the world will be affected, and China's situation is relatively good, but it is difficult to be alone.
Well, you know, the price is generally rising, and it is far more than these raw materials and the car itself.
02 New energy and semiconductors may be frustrated
Palladium is enough to give the global auto industry a headache. If the supply of nickel metal is also limited, then the new energy vehicle innovation that is in full swing around the world will be frustrated.
In the current lithium-ion battery, low nickel and low cobalt is a trend, 811 ternary lithium batteries and even nickel-free cobalt-free batteries have become the direction of efforts of many power battery suppliers such as the Ningde era, but after all, nickel has played a role in improving the energy density of the volume, and cobalt has played a role in supporting the framework, and it is difficult to be replaced in a short period of time. Once Russia's nickel metal supply is also cut off and the supply of power batteries is down, then the high growth trend of new energy vehicles will inevitably be dragged down.
Just like palladium, nickel supplies have substitute countries – Indonesia and the Philippines, two ASEAN countries that are the most important "substitutes". But the price and demand for nickel is also rising rapidly, and the auto industry is facing pressure similar to palladium. This can be seen from the sales targets of new energy vehicles in various countries - the higher the target, the more unbearable the pain caused by the shortage of raw materials.
Every continent has set ambitious goals for the electrification of the automotive industry.
In 2020, The State Council of The People's Republic of China issued the New Energy Vehicle Industry Development Plan (2021-2035), which plans to reach about 20% of the total sales volume of new energy vehicles by 2025. The explosive growth of the new energy vehicle market in 2021 to 3.4 million units makes this goal very conservative, and the expected sales value of new energy vehicles in 2022 has been raised to about 5.5 to 6 million units. Some agencies predict that this number will be 9.35 million vehicles in 2025, when the penetration rate will be as high as one-third, much higher than the 20% target.
Europe's electric vehicle targets are not less aggressive than China's. Even the United States, which has long enjoyed low oil prices and is not very popular with electric vehicles, has changed its course after the 2025 CAFE corporate fuel consumption target tug-of-war, and it is the turn of the pro-environmental Democratic Party to take office, and the Biden administration announced that by 2030, electric vehicles will account for half of the sales volume of the car market.
Electrification and intelligence are twin brothers, and the fate of the industrial chain facing the threat of war is also converging.
Memory chip makers are no less worried than automakers, and a Citi study showed that the Russo-Ukrainian war could disrupt supplies of krypton, krypton and xenon, inert gas elements necessary for lasers used in chip production. In response to emergencies, memory chip manufacturers have raised their inert gas inventories from the usual 4 weeks to 6 to 8 weeks, but they have not been able to solve the long-term problem.
According to data provided by Wells Fargo analyst Aaron Raker, Ukraine produces and supplies 90 percent of the neon in the United States. Therefore, the Russo-Ukrainian war may lead to insufficient supply of inert gases, push up the price of semiconductor wafers, and exacerbate chip shortages.
In addition to Russia itself, the West is concerned that Russia's "allies" will take similar steps to counter the West.
"The most critical thing is what China will do," analyst Sam Abuelsamid said. "If we impose tough sanctions on Russia, they could respond and cut us off from getting a lot of what we need," including circuit boards and other raw materials, such as lithium for electric cars. Of course, as of now, the mainland's statement is that it hopes that the two sides will negotiate in accordance with the principle of peace and have not participated in the dispute. However, it also depends on whether the United States continues to engage in trade wars with China.
Nickel and palladium alone can create a flattering result for the global auto industry, not to mention that Russia is also an important exporter of other resources such as natural gas and oil. The great power's influence was not always achieved by relying solely on the army, and resources and commerce were always munitions that went hand in hand with shells.
03 The ups and downs of making and selling
Compared with the more intuitive export of resources, Russia is also an important manufacturing hub and key market for the automobile industry, and once Russia is sanctioned, whether it is local automobile manufacturing or sales, it will undoubtedly suffer a heavy blow.
Automakers including Volkswagen, Toyota, Renault-Nissan and Stellantis all have factories in the area. According to analysts and industry officials, at least a quarter of the parts of the cars produced in Russia are imported from other countries, including the United States, so if Russia is subject to economic sanctions and Western technology and products are shut down, it will lead to the operation of the aforementioned car companies' factories in trouble.
The more multinational car companies that bet heavy treasures in Russia, the more panicked they are at the moment. The shadow cast by the Russo-Ukrainian war is reminiscent of the PSA, Renault, etc. after the UNITED States sanctioned Iran in 2018, and lost hundreds of thousands of annual sales.
The first to bear the brunt is the Renault-Nissan-Volga Group, the highest sales car company in the Russian market, and its Lada brand will sell 350,000 vehicles in 2021, contributing more than 20% of the annual sales of new cars in Russia. Renault CEO Luca de Mayo said that he was paying close attention to the situation in Russia and Ukraine, and CFO Clotilde Delbos tried to reassure others, repeatedly explaining that the Volga is fully self-sufficient in both the supply chain and the capital chain, so it is "very safe in our view".
The capital market did not buy much, and the price of Renault shares fell by more than 9% on the 24th local time. Volga CEO Nicolas Maure, apparently not as easy as the head of the parent company, announced that it had begun looking for an alternative to chip supply in case Russia was sanctioned by the European and American economies.
Then there's the anxiety-ridden Volkswagen and Stellantis, both of which have factories in Kaluga, Russia. Located 180 km southwest of Moscow, the city is the hub of Russian automobile manufacturing and is home to suppliers such as Continental, Magna and Visteon in addition to finish-up companies.
The models produced at Volkswagen's Kaluga plant include: Volkswagen brand Tiguan and Polo, Skoda brand Xinrui, assembling semi-finished kits for the Audi Q7 and Q8. The plant will have a production capacity of 118,000 complete vehicles and 150,000 engines in 2021. Since its opening in 2007, Volkswagen has invested more than 1 billion euros in the plant, accounting for half of the total investment of 2 billion euros in Russia. In addition, GAZ Automobiles' Nizhny Novgorod plant manufactures Volkswagen and Skoda brand models.
Stellantis and Mitsubishi Motors set up a joint venture plant in Kaluga, which in 2017 produced vans for its predecessor PSA, and after PSA acquired Opel and merged with FCA to form Stellantis, the factory produced three brands of vans: Peugeot, Citroën and Opel.
▲ Renault's stock price fell sharply
Other European and American car companies include:
Mercedes-Benz, which invested more than 250 million euros in the northwest of Moscow, opened in April 2019, employs more than 1,000 people, and produces Mercedes-Benz E-Class and SUV models;
BMW has been assembled in SKD mode by the Kaliningrad plant of the Russian company Avtotor since 1999, and in 2020 BMW abandoned its plan to build a full-scale production plant there;
Ford and GM have been withdrawing from the Russian market for several years, With Ford shutting down businesses including a factory in St. Petersburg in 2019 and GM starting its exit in 2015 and selling its remaining stake to Volga Motors in 2019.
A spokesman for Mercedes-Benz BMW could either express serious concern about the situation or lament that "we run the company within the framework of the rules established by politics." No matter how much money the industry makes, it can't do anything in the face of political turmoil.
04 What should Chinese car companies do?
Chinese readers naturally pay more attention to Chinese car companies. As part of the "double cycle" strategy, auto companies "going out" to expand overseas markets is the boom in recent years. Russia has been the TOP3 of China's auto export market for many years, and in this boom, it has once again become an important target for independent car companies.
According to our data from statistical agencies, the Chinese car companies with the highest sales in Russia in 2021 are Great Wall and Chery, Haval and Chery brand series of 39,000 and 37,000 vehicles respectively, and even Chery Xingtu has sold nearly 4,000 vehicles. Another Chinese car company that broke the 10,000 yuan is Geely, with sales of 25,000 units. Changan, FAW, AND GAC also have achievements of varying levels.
This makes the total sales of Chinese car companies in Russia cross the mark of 100,000 units for the first time in 2021, an increase of 102.3% year-on-year to 115,700 units, becoming the only series in the Russian auto market to increase significantly in 2021.
Great Wall Motors has a long presence in Eastern Europe, with the Tula plant implementing a two-shift system from September 2021 and reaching a design capacity of 80,000 vehicles per year from November to December, supporting haval brand sales in Russia in the past two months to more than 4,000 units. Chery, which once assembled in Russia but was shelved due to a decline in performance, is now reconsidering assembly and even local production, and is also negotiating cooperation with the Russian Solers Group in areas such as automobile production and electric vehicle technology development. Geely, on the other hand, supplies export vehicles to the Russian market from its Belarusian plant.
From the perspective of launching new cars, Chinese car companies were originally "riveted" in the Russian market, such as Haval will bring F7/7X and big dogs, Chery will introduce Tiggo 4 Pro and the first global model OMODA 5 this year (the first landing market is Russia), Geely will release the first medium-sizeD SUV Xingyue L and a new generation of Altas in Russia, and the second generation of Changan CS55 Plus is also listed in Russia this year.
The more you expect it, the more worried you are in the face of the storm. Although European and American car companies will be more dragged down in the local market because of the conflict between the government and Russia, it seems to be beneficial to Chinese brands, but if the Russian economy is seriously degraded by sanctions, consumers' purchasing power and confidence will be frustrated, which is definitely not a good thing for ambitious Chinese car companies.
Around 2010 and 2015, the Russian auto market has repeatedly slipped due to political and economic reasons. According to the European Chamber of Commerce AEB, the Russian light vehicle market will reach 1.72 million units in 2022, with no deterioration in the political situation and no new trade restrictions (especially sanctions), an increase of about 3.3% year-on-year. This premise seems to have been just a beautiful idea.
The flames of the Russo-Ukrainian War burned not only to the side of Kiev, but also to the automobile and even the semiconductor industry. China's auto industry and consumers are also unable to stay out of the way. How to grasp our own direction in the ups and downs of the tide will be a major test for us.
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