"When a butterfly in the Amazon rainforest of South America, occasionally flapping its wings a few times, may cause a tornado in Texas in the United States two weeks later."
The conflict between Russia and Ukraine intensified, and the car circle panicked.
The war between two major countries producing rare gases and metal raw materials has made the supply chain that is not rich even worse, worsening the situation of "lack of core" and lack of electricity.
Under the spread of war, imported parts could not be transported to the factory, and the factories in Russia and Ukraine stopped production in a large area. It also forced Ukrainian cables to be unable to enter Germany, and Volkswagen's German factory ID. series models faced suspension of production, or 8,000 workers would be laid off.
Under the chain reaction, the BBA staged a Russian retreat, and the overseas business of independent brands will also be greatly affected. On the one hand, the ruble is devalued and the money is difficult to earn, and on the other hand, the price of oil is soaring.
The conflict has spread the bow effect, and how will the already fragile automotive industry develop after this variable?
Frustrated by independent brands going to sea?
"Russia is the main market for independent brands to go to sea, and the overall impact of this conflict is greater. However, if the vehicle manufacturer can recycle in Russia, it will be less affected than the direct import and export trade of the whole vehicle. For example, Great Wall has built a factory in Russia, and its sales business has been carried out for many years, and its resistance to risks will be stronger. Xu Haidong, deputy chief engineer of the China Association of Automobile Manufacturers, told Phoenix Auto.
At present, china has more than 10 independent brands such as Great Wall, Geely, Chery, and Changan all have automobile sales business in Russia, but only Great Wall Motors has invested in the establishment of vehicle production plants in Russia.
According to public information, Great Wall Motor's Tula plant in Russia was completed and put into operation in 2019, with an annual production capacity of 150,000 vehicles, making it the first full-process wholly-owned manufacturing plant of a Chinese car company overseas.
In addition, Changan Automobile has an SKD production capacity layout of 12,000 units in Russia, Lifan Automobile has a CKD production capacity layout of 60,000 units, and BAIC has 25,000 units. Geely, Chery, etc. also have some CKD production capacity layout.
According to previous incomplete statistics, Chery has a total of 102 distribution centers in 65 cities; Geely has a total of 82 in 56 cities; and Great Wall has nearly 100 dealers in 59 cities.
According to data from Autostat, a Russian automotive industry analyst agency, in 2021, Chinese cars have become the most popular cars among imported cars, with Japanese and German ranking second and third.
In 2021, China exported a total of 122,800 vehicles to Russia, with a market share of nearly 7%. At the same time, the value of exports has increased by nearly 400% in five years, rising from $500 million to about $2 billion.
The market was originally good, but the Russian-Ukrainian conflict may rewrite the continued growth trend. Cui Dongshu, secretary general of the Association, said that China's automobile exports to Russia have performed relatively strongly in recent years, and the conflict has made exports to Russia face huge uncertainties.
Zhang Xin of Guotai Junan Securities said that specifically, whether the independent brand overseas Russia is affected by the conflict lies in the supply of auto parts. If they are all produced domestically and shipped to assemble, the impact will not be great, but if the whole vehicle needs to be imported, it may have an impact.
China's car exports to Ukraine have generally remained relatively stable, from nearly 3,000 vehicles sold in 2017 to 9,929 vehicles exported in 2021. Exports also rose from $28.53 million to $141.91 million. Cui Dongshu pointed out that the recent losses in Ukraine are very large, and imports from China should also decline, which is also detrimental to mainland automobile exports.
At present, in the Chinese automotive industry's exports to Russia and exports to Ukraine, the proportion of trucks is relatively large, and the export of special vehicles is also more important, so for Russia and Ukraine, transportation is very important. The Russian-Ukrainian conflict is bound to be an international loss, especially for Chinese car companies, which are bound to face the loss of insufficient demand.
In addition, Xu Haidong also mentioned that there is a possibility of escalation of US sanctions on Russian industries, or it will affect the mainland automotive industry, restricting the activities of some Chinese companies around the world.
Referring to the previous US sanctions on Iran, it involves 6 Chinese companies. The companies are listed on the sanctioned entities on the grounds that they provide transportation and sales channels for Iran's petrochemical products.
Financial risks, not only the depreciation of the ruble?
At the same time, Xu Haidong also mentioned that the depreciation of the ruble may also cause the loss of independent brands in Russia. Financial instability will affect the purchasing power of local consumers in Russia and Ukraine, adding to the disadvantages of the consumer market.
Another consultancy executive revealed that many Russian foreign or joint ventures have difficulty supporting local operations due to the ban and capital controls of the International Fund Clearing System (SWIFT).
In addition, even if there is a car transaction, there is a problem of foreign exchange control, and the income will shrink significantly after conversion. Referring to the sharp depreciation of the ruble at the end of 2014, Geely Automobile warned that the russian business lost money due to foreign exchange exchange, resulting in a net profit decline of nearly 50%, and the stock price fell by more than 20%.
Based on past experience, car companies may take the approach of raising car prices or charging dollars to resist the depreciation of the ruble. However, at present, most of the best-selling models of Chinese cars in Russia take high cost performance as the core selling point, and after increasing the price of products, it may have a great impact on sales growth.
Zhang Xin believes that although the ruble is depreciating, at the same time, oil prices and gas prices are rising sharply, which can play a certain offsetting role. Overall, it maintains a general balance and will not be too much of a disadvantage.
In addition, some analysts pointed out that if the car company adopts the hedging of foreign exchange income in advance, it will also hedge off certain risks. That is, when it is judged that the currency is about to depreciate, it is possible to make reverse transactions in the foreign exchange market and avoid uncertain fluctuations with a certain cost.
At present, how to deal with the conflict is still a difficult problem facing the independent brand. Many industry employees said that they did not dare to give comments at present, and whether domestic factories would stop production is still unknown.
However, some optimistic industry insiders pointed out that when foreign car companies withdraw sharply, Russia, a market with a population of more than 100 million and more than 2 million local consumption capacity, will provide opportunities for independent brands to go overseas. At the same time, the conflict may increase the sales of off-road models such as SUVs and pickups, and there is a certain market increase.
A premeditated retreat
Russia is the world's eighth-largest automotive market, but after the conflict began, Germany's Volkswagen Group (including its Audi, Skoda and Porsche), Daimler Group, the US General Motors Group (Chevrolet, Buick, Cadillac), Volvo's passenger car and truck business, and India's Tata Group acquired British car brand Jaguar Land Rover, have all suspended the delivery of cars to Russian dealers.
At present, this list of "withdrawals" continues to increase.
In addition to some geopolitical statements, one of the important reasons for the "great retreat" is that more and more companies have long believed that the Russian market is not worth the risk. Previously, the United States has repeatedly sanctioned Russia, and the expected economic slowdown has inhibited the growth of the Russian auto market.
For U.S. automakers in particular, Russia is not an important market. For example, GM sold only 3,000 cars in Russia in 2021, most of them Cadillac-branded SUVs.
Ford, which is also a U.S.-based entity, has a relatively small business in Russia and has been reducing the scale of its operations in Russia.
In 2019, Ford closed three factories in Russia and announced that it would gradually withdraw from the country's auto market. Some analysts said that the suspension statement in response to the European and American war sanctions under the Ukraine crisis is just a push along the water.
In 2021, Ford sold only 22,000 cars in Russia and had no major operations in Ukraine.
Ashkenazi sales are relatively good, but the scale of business is not very large.
In 2021, BMW sold around 49,000 cars in Russia, accounting for about 2% of its global car sales. As a result, BMW has only built one SDK assembly plant in Russia, cooperating with the Russian automaker Avtotor, with an annual production capacity of about 12,000 vehicles.
But it is not only car companies that are "retreating", but also a greater disaster for some foreign car companies that rely heavily on the Russian market.
The foreign car brands that account for a relatively high proportion in Russia are Renault and Hyundai. According to research firm IHS Markit, Renault, France, which has a controlling stake in Russian automaker AvtoVAZ, accounts for about one-fifth of Russia's car production, and South Korea's Hyundai Group accounts for 27.2%.
When the market is facing a "cold winter", the stock market's sense of smell is always the sharpest. After the conflict, Renault shares plunged more than 37%. This is a heavy blow for Renault, who has just turned a profit in 2021.
It is reported that the Russian market accounts for 8% of Renault's global sales, and all factories in Russia have suspended production.
Automotive supply chain, a new crisis?
At the beginning of 2022, the lack of "core" has not eased much, and giants such as Volkswagen, Toyota and Honda have announced production cuts.
Less "electricity" intensified, so that the Great Wall Euler chose to give up the black cat white cat, so that the first sales of Ford electric Mustang sharply reduced to 352 vehicles, BYD no "lithium" to make trouble, adding more load to the already fragile automotive supply chain.
At present, a number of car companies have said that supply chain disruptions, such as the closure of some suppliers' factories in Russia and Ukraine, will have a wide impact on global auto manufacturing plants.
First, this makes the "missing core" storm continue.
The rare gases neon and palladium are both important raw materials for the manufacture of semiconductors, and Ukraine and Russia are the main exporters of these two raw materials.
Since the Soviet Union invested heavily in the field of special industries, its production base for noble gases was located in Ukraine. As a result, Ukraine is currently the country with the largest production of neon gas.
Russia's Krynor Company, on the other hand, mines 40 percent of the world's palladium. In addition to being used in chip manufacturing, this raw material can also effectively reduce exhaust emissions.
Second, metal raw materials produced in Russia will also continue to affect the automotive supply chain.
11% of the nickel used in the production of stainless steel and power batteries comes from Russia. Bai Yiyang, manager of the international research department of CMB, pointed out that Russia is one of the nickel exporters, which may have a certain impact on the raw material price of ternary batteries.
In addition, Russian cobalt ore accounts for 4% of the world's total production, vanadium ore accounts for a quarter of the world's total production, and copper ore accounts for 3.5% of the world's total production.
Third, the conflict will affect the supply of other components needed for the manufacture of the vehicle.
According to the Ukrainian Investment Agency, there are 22 foreign auto parts suppliers in Ukraine, operating a total of 38 factories, producing products for the automotive industry, with spare parts such as harnesses, electronic products and seats.
Since the conflict occurred in Ukraine, most of the factories stopped production, which effectively affected the progress of car construction.
At present, Volkswagen has stopped production at the Dresden and Zwickau plants in Germany due to delivery problems with cables in Ukraine. It is currently affecting the production of Volkswagen ID.3, ID.4 and CupraBorn electric vehicles. Volkswagen will have to lay off more than eight thousand workers before production can resume.
A Volkswagen group spokesperson admitted, "Ukraine is not the center of our supply chain, but we suddenly found that when this part is missing, it is the center." ”
Renault CEO Lucade Meo also said the escalation of tensions between Russia and Ukraine could lead to another supply chain crisis. Because transit countries have tightened border controls and are under pressure to change some of the established logistics routes.
"Island" Russia, how to protect the automobile industry?
Under the supply chain crisis, the Russian government has begun to lay out and start to reduce the impact of new sanctions on the country's automotive industry, especially to reduce dependence on parts and components imports.
By 2021, the localization rate of the Russian automotive industry is 67%. The sales share of Local Russian car companies reached 76%, accounting for 83% of total sales.
An auto industry consultant said that for Russia's home auto manufacturing industry, the import restriction of parts will not have a catastrophic impact. Most imported products include plastic products, fuel tank exhaust pipes and steering wheels.
It is reported that the granular plastics that produce auto parts mainly come from China, rubber from Southeast Asia, and polymers from China, Europe or Turkey. This means that the suppliers of auto parts needed in Russia are highly replaceable, and even if the subsequent localization production is carried out, the cost will not be very high.
At the same time, the Russian Ministry of Industry and Trade remains optimistic, saying that the localization rate of Russian auto parts production has increased significantly in recent years, and believes that Russian and global automakers have the ability to resist Western sanctions.
At the same time, Russia launched the Automotive Industry Development Fund, which will provide preferential loans to domestic auto parts manufacturers to further establish production bases.
In addition, parts suppliers are also indirectly affected by the Conflict between Russia and Ukraine. In this case, Russian automakers could get similar equipment from the EU and China. French auto parts maker Valeo said the conflict could weigh on industry output and raise energy or raw material prices.
Even without sanctions, new car sales in Russia will decline in 2022. Sales are expected to fall to 3.3 percent this year from 4.3 percent in 2021, according to the European Business Association, due to shortages of electronic components, logistical challenges and rising costs.
Zhang Xiang, an automotive analyst and researcher at the Automotive Industry Innovation Research Center at North China University of Technology, said that even if inventories improve, rising oil and aluminum prices may affect consumers' willingness and ability to buy cars. Due to the escalation of the conflict and sanctions, the expectation of russian car sales and global car sales will decline to a certain extent.
In addition, Wells Fargo analyst Colin Langan noted in a research note that the conflict could push up oil prices to more than $100 a barrel, which will put inflationary pressure on European and American consumers. He said that while consumers are willing to pay higher prices than the list price to buy new cars, the continued rise in fuel prices could affect the long-term recovery of the global auto market.