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Jiwei Network reported that the global automotive industry chain has not yet passed the "haze" of lack of cores, the latest data from AutoForecast Solutions shows that last week (February 21-27), the global auto market lost about 65,000 car production due to lack of cores, and the shortage of other auto parts has also continued to hit, and now the situation between Russia and Ukraine is becoming increasingly tense, which undoubtedly adds more uncertainty to the automotive supply chain.
The automotive industry, which has long relied on cross-border supply chains, was one of the first industries to be affected by the situation. Some routes are cut off, logistics are facing challenges, further aggravating the risk of supply chain shortages, oil prices, aluminum prices, nickel prices, neon gas prices, etc., rising, or even record highs, these may make this year's automotive industry greatly under pressure. J.D. Power, LMC Automotive and other auto consulting companies said that the situation in Russia and Ukraine poses a "major risk" to the recovery of global light vehicle sales this year, and lowered the global light vehicle sales forecast this year by 400,000 to 85.8 million units.
Russian-Ukrainian conflict, environmental impact estimates on the global auto market "ok"
At present, the Conflict between Russia and Ukraine is escalating, due to the shortage or potential risk of parts caused by the supply chain, as well as the sanctions imposed by the United States and the European Union on Russia, more and more car companies and suppliers with layouts in Russia have announced the suspension of some or all of their business in Russia, of course, the attitude and strength are also changing with the changes in the situation. Figure 1 shows the current business situation of these car companies/suppliers in Russia.
As Lu Shengyun, partner of Artefact and strategic adviser of Zero Idea Technology, said to Jiwei Network, at this stage, the automotive industry is somewhat "kidnapped" by geopolitics.
For example, Ford Motor and General Motors, which withdrew from the Russian auto market a few years ago, are now doing very small businesses in Russia, selling about 20,000 and 3,000 units a year, respectively, and now responding to the above in this situation is just a push under U.S. sanctions against Russia.
BMW also admitted that "politics determines the rules of our operations as a company, and if the framework conditions change, we will evaluate them and decide how to deal with them." ”
So, what will be the actual impact?
Judging from the position of the Russian and Ukrainian auto markets in the global auto market, they are not currently auto powers, and according to IHS Markit, factors such as instability and economic stagnation in Russia led to the peak of the auto market in 2008, with sales of only 2.96 million units.
In the past three years, the Annual Sales of the Russian automotive market has been between 1.6 million and 1.75 million units. According to the European Business Association (AEB), about 1.66 million cars will be sold in Russia in 2021, accounting for 2% of global car sales; Ukraine will only sell about 100,000 vehicles in 2021. In this regard, Lu Shengyun also said that "the Russian and Ukrainian car markets are not the most important car markets in the world, so the global car market environment is estimated to be good."
But as the conflict grows tense, it may have a significant impact on a small number of car companies. Here's a look at the best-selling brands and popular car companies in the Russian auto market in Figure 2 in 2021.
It is reported that in the Production of Russian cars, the French Renault Group, which has a controlling stake in Russian car manufacturer AvtoVAZ, accounts for 39.5%, followed by South Korea's Hyundai Group with 27.2%. In addition, according to IHS Markit, German automaker Volkswagen has a 12.2% share, while Toyota motor vehicles are close behind with a 5.5% share, and other car companies follow with low single digits.
Therefore, in terms of risk point of view, Renault risk may be the greatest. Russia is Renault's second-largest market after France, and French Renault CEO Luca de Meo warned that deteriorating relations between Russia and Ukraine could lead to "another supply chain crisis" for Renault. Renault's Russian branch said on Friday that its auto assembly plant in Russia would suspend some operations this week due to a shortage of spare parts due to logistics bottlenecks. Renault has 3 car assembly plants in Russia, and according to Citibank, 8% of the company's core profit comes from Russia. In addition, Avtovaz, a top Russian automaker controlled by Renault, said a car plant in Togliatti in central Russia may halt part of its assembly line due to continued shortages of electronic components around the world.
Hyundai Group, which ranks second in Terms of automobile production in Russia, has now suspended deliveries of cars to Russian dealers. At the same time, due to the shortage of semiconductor supply, it has closed its automobile production plant in St. Petersburg, Russia, on March 1, and the plant closure will last for five days. An industry official said: "This plant closure is caused by supply disruptions caused by semiconductor shortages, and this decision has nothing to do with the current situation in Russia and Ukraine." "While Sales in Russia is not a high share of Hyundai's global sales, Russia is one of the group's fastest-growing markets, with Hyundai planning to sell 455,000 vehicles in Russia in 2022.
Volkswagen said on Monday that it was suspending the delivery of cars to dealers in Russia, and a Volkswagen spokesman said: "Deliveries of cars will resume as soon as the impact of sanctions by the EU and the US is clarified." Volkswagen has previously said it will suspend production at two German factories this week due to delays in ukrainian parts production, and a spokesman said: "Ukraine is not the center of our supply chain, but when this part is missing, it becomes the center." ”
Today (March 3), Toyota motor also joined the boycott of Russia, its Russian plant will stop production from tomorrow (this Friday), and the local import of Toyota motor vehicles in Russia has been stopped indefinitely due to supply chain disruptions.
Under the risk, the adjustment of the production strategy of supply chain enterprises is crucial
With the increasing tension of the situation, more and more car companies and suppliers have joined the ranks of boycotting Russia. In this regard, Lu Shengyun pointed out, "The key at present is that the russian business of car companies and suppliers is exposed to the risk of sanctions against Russia, and these companies should begin to study how to make a judgment on the current situation, and then start to formulate production strategies." ”
Some companies may already have plans to withdraw from the Russian market. For example, British energy giant BP abruptly announced on Sunday that it would sell its 20 percent stake in Rosneft for $25 billion. According to the Deutsche Zeitung, the Mercedes-Benz group is also seeking legal avenues to sell its 15% stake in Camas as soon as possible, and a spokesman for Mercedes said the company's business activities must be re-evaluated in the light of the current situation.
Some companies are also moving or preparing production lines. For example, Finnish tire maker Nokian said it would move some key production lines from Russia to Finland and the United States in response to further U.S. and European sanctions against Russia. Aptiv's executive also revealed that in the past few months, the company has shifted a large number of auto parts production from Ukraine before the situation in Russia and Ukraine has further escalated, leaving behind some lower-yield parts so as to better cope with the chaos. Stellantis said that if Western sanctions interfere with production in Russia, the company will be prepared to transfer production of these vehicles to other factories.
Of course, some companies with heavy investment in Russia are still waiting to see the development of the situation, or wait for the situation to improve, such as renault and Hyundai mentioned above. However, it should be pointed out that in the long run, geopolitics or the impact on some companies may be "fatal", for example, when the PSA Group returned to Iran before the restructuring, its sales growth was leading the way, but due to the pressure of US sanctions on Iran at that time, it suspended its business in the Iranian market, and the financial data seemed to have less impact, but at a deeper level, it lost the market that brought it incremental.
The short-term cost of semiconductor fabs will increase, but there will not be much impact on production
In summary, from the perspective of the global auto market, the impact of the situation in Russia and Ukraine is currently estimated to be manageable, and its potential impact on the automotive industry is mainly focused on the potential disruption of natural resource supply. It is reported that Russia is the world's leading exporter of aluminum, nickel, palladium and platinum, and Ukraine is a major producer of inert gases.
In addition to oil, Russia is the world's non-ferrous metal reserve and production power, is the world's third largest nickel producer, nickel production accounts for 9% of the world, is also the world's second largest aluminum producer, aluminum production accounts for 6% of the world, therefore, this situation or exacerbate the global production of electric vehicle batteries.
As for inert gases such as neon, which are necessary for lasers used in chip production, concerns about tensions between Russia and Ukraine in the semiconductor industry continue to ferment, and there is a risk of disruption in the supply of these key semiconductor materials.
In this regard, Zhao Yi, research director of the business department of Aiji Micro Consulting, said that the situation in Ukraine is bound to cause the price of neon gas to rise, and it has risen by as much as 3 times, but the fabs usually have a relatively sufficient stock, which will not have a big impact on the production of the fab, but the rise in the price of neon gas will eventually increase the cost of the fab. On the other hand, because neon gas is a by-product of steel plants, although the proportion of neon gas resources imported from the mainland is quite large, it should not be too difficult to replace this piece of domestic production. Therefore, for fabs, it will increase short-term costs, but it will not have much impact on production.
And chipmakers have long been aware of neon gas as a possible supply bottleneck in geopolitics, and since then, their suppliers have begun to diversify. It is reported that in 2015, due to the geopolitical reasons of Ukraine, it caused a significant impact on the supply of neon gas in the region, and the international market changed from long-term oversupply to short supply, resulting in a significant increase in the price of neon gas, according to the statistics of the Us International Trade Commission (USITC), the price of neon gas soared by more than 600% in the same period. Until 2017, with the stabilization of the situation in Ukraine and the increase in neon gas production in other countries, its prices gradually returned to normal.
So, what is the real impact on the chip supply chain, which is already a headache for the automotive industry?
Bloomberg reported that the U.S. Semiconductor Industry Association (SIA) pointed out on Thursday that Russia is only a small market for the chip industry, and the Russian-Ukrainian conflict will not pose a threat to chip supply. SIA CEO John Neuffer said that while sanctions in Europe and the United States could have a significant impact on Russia, Russia is not a major direct consumer of semiconductors, accounting for less than 0.1% of global chip purchases. On the other hand, the semiconductor industry has a range of different suppliers of key materials and gases, so we do not believe that the situation in Russia and Ukraine poses an immediate risk of supply disruption.
The SIA also said sanctions imposed on Russia by the United States and its allies are also unlikely to have a significant impact on industry sales. In addition to SIA, semiconductor manufacturers such as Intel and GF have also said that they do not expect the semiconductor supply chain to encounter real risks, and they have a diversified global supply chain that can provide more buffers.
Write at the end
At present, it is too early to know how deep the impact on the automotive supply chain and how long the impact will last, depending on how the situation between Russia and Ukraine changes in the future, as well as the sanctions of the United States and the European Union, etc., but after experiencing the supply chain management under the crisis of the epidemic and chip shortage, I believe that the resilience of the global automotive supply chain has been enhanced, and based on the production strategy formulated in advance, I believe that the recovery speed of major suppliers from the crisis will be faster than expected in the past.
(Proofreading/Jimmy)