Author / Aaron, Cao Jin
Russia's invasion of Ukraine has driven Europe and global markets into a frenzy. Automakers are also working to determine how much the war and economic sanctions against aggressor Russia will have on the automotive supply chain, production and labor.
Europe
Needless to say, Europe's homegrown automakers will be hit the hardest, as supply lines from Ukraine and Russia are already frozen when the bombs fall.
According to The New York Times, assembly lines in Europe have come to a standstill due to a shortage of auto parts made in Ukraine, a sign that the Russian invasion could have a greater impact on the European economy than expected.
Ukraine, although not a hub of the automotive industry, is an important supplier of automotive wiring systems.
The Wall Street Journal said that when the war broke out, dozens of auto parts manufacturers closed their factories in Ukraine. Although it has only small auto parts projects, it has become a major supplier of wire harnesses needed to assemble automotive lines and connect various parts.
Volkswagen said on March 1 that a shortage of spare parts would force the shutdown of its main plant in Wolfsburg and its Zwickau plant in eastern Germany, which produces and exports ID.4 electric vehicles to the European and American markets.
(Volkswagen's plant in Wolfsburg, Wolfsburg, Germany)
BMW, on the other hand, will cut production at its plants in Germany, Austria and the United Kingdom. A BMW spokesperson said production will also be halted next week at the Dingolfin plant in Bavaria, Germany, which produces 1,600 cars a day, including flagship models 5 Series, 7 Series and 8 Series. Due to the lack of spare parts, BMW's Mini plants in Munich, the Netherlands and the United Kingdom will be discontinued at the same time.
Volkswagen's Porsche also announced on March 2 that it had stopped production at its Leipzig plant. The Leipzig plant, which produces the Panamera sedan and the Macan sport utility vehicle, shut down The plant slowed Porsche's ability to deliver the two popular models to users worldwide.
In addition, for the Škoda brand, Russia is the second largest market after Germany, while Skoda's multi-brand factories in Nizhny Novgorod and Kaluga have also been suspended.
Cars are an important part of the European economy, and while German automakers support a network of suppliers across Europe, prolonged plant downtime could have a significant impact on the European economy.
At the chip level, which has attracted much attention, Ukraine has the main raw material for making chips, neon, and more than 90% of the neon used in the US semiconductor industry is provided by Ukraine, which is essential for the laser used in the chip manufacturing process. At a time of global semiconductor shortages, this war invasion has undoubtedly exacerbated the deterioration of supply chain systems
At the same time, the war threatened European automakers, which were heavily dependent on Russian oil and gas.
On the other hand, according to the Russian business newspaper Vedomosti, letters from several automakers around the world show that they have stopped shipping orders from local dealers to Russia since the time of the Russian invasion on February 24. Russian distributors for Audi and Chevrolet, for example, have been notified, while Porsche and Land Rover have also stopped shipping.
According to Reuters, more and more companies have joined the ranks of refusing to export to Russia: Honda, Ford, Mazda, GM, Daimler Trucks, Volvo have confirmed the business freeze on Russia. The commercial reason is that the war and global sanctions against Russia have had a huge impact on the economy and logistics, and from a political point of view, car companies are clearly facing public pressure not to be "too close" to the invaders, so the freezing of Russian business is likely to be indefinite.
In addition to Japanese car companies, German and French OEMs have the world's largest group of automobile manufacturers, whether it is the German Volkswagen Group or the French-Italian joint venture Stellantis Group, which control most of the global car distribution. Therefore, if the War between Ukraine and Russia cannot be stopped in a short period of time, the European economy will have the greatest loss on the surface, but in fact it will have a major impact on the global automobile industry.
Korea
Hyundai Group is highly dependent on rare gases such as krypton, krypton, and xenon supplied by Ukraine, which are the raw materials for making batteries and superconductors for electric vehicles, and the war has led to tighter supply and prices are expected to rise sharply.
(Hyundai Group's factory in St. Petersburg)
Hyundai established a plant in St. Petersburg, Russia, in 2010, and recently acquired GM's russian plant to produce Hyundai Tucson, Palisade and Kia Sportage, which were expected to be exported to North America and Europe this year. Currently, Hyundai Group produces more than 230,000 cars in Russia every year.
At the same time, Hyundai also occupies the largest market share in Russia; Hyundai and Kia have a market share of 10.3% and 12.3% in the Russian automotive market, respectively. In 2021, Hyundai Group will sell 373132 cars in the Russian market.
With the outbreak of war and economic sanctions against Russia, modern global business is in crisis, and South Korea's economy will also be hit hard.
According to the Korea Times, in 2021, South Korean car companies sold $2.5 billion worth of cars to Russia, in addition to $1.45 billion worth of auto parts. Previously, South Korea's exports of cars and their parts to Russia accounted for 44% of the whole year, but the sanctions imposed by Europe and the United States on Russia could have a serious impact on South Korea's exports.
China
Mainland automakers have also been making inroads into the Russian market. Great Wall Motor opened a factory in Russia in 2019 and more than doubled its local sales last year.
(Great Wall Motor's Tula plant in Russia was completed and put into operation)
Chery has also said it is looking for a local partner in Russia to produce electric vehicles in the country. In 2021, Chery's car sales in Russia more than tripled.
According to relevant statistics, in 2021, the sales volume of Chinese car brands in Russia reached 115,700 units, accounting for nearly 7% of the Russian passenger car market share.
According to the China Passenger Car Association, Russia was the third largest export destination for Chinese cars last year, after Chile and Saudi Arabia. Cui Dongshu, secretary general of the association, wrote on his personal WeChat post on February 27: "The conflict between Russia and Ukraine poses a huge risk to the Chinese automotive industry, and Chinese auto exporters must prepare for the risk of the depreciation of the ruble."
Moreover, as the world's largest automobile producer, China's further shortage of raw materials caused by the war cannot be ignored. Due to the shortage of chips, China's automobile production will be reduced by 2 million units in 2021. According to previous predictions, chip supply can return to normal in the second half of 2022, but for now, it seems that the problem may continue.
The impact on the global automobile industry caused by the War between Ukraine and Russia shows that the community of human destiny and the global economic community that the mainland has been advocating is well deserved. It seems that the whole body is the current situation in the automobile industry. But the war is still ongoing, and the impact on the global auto industry needs to be dynamically observed.
Resources:
https://www.wsj.com/articles/ukraine-war-plunges-auto-makers-intonew-supply-chain-crisis-11646309152 mod=Searchresults_pos1&page=1
https://www.nytimes.com/2022/03/01/business/volkswagen-bmw-autos-germany-ukraine.html
https://www.motortrend.com/news/russia-ukraine-war-sanctions-supplies-economy-car-industry/
https://automotiveparade.com/2022/03/02/the-impact-of-russia-ukraine-war-on-the-automobile-industry-of-india/
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