FRANKFURT, March 7 (Xinhua) -- Due to the shortage of chips, German car production has not yet returned to pre-COVID-19 levels, and the recent outbreak of the Russian-Ukrainian conflict has brought new challenges to the German auto industry. The Conflict Between Russia and Ukraine has led to tight supply of parts and raw materials for automobile production, and several German automakers have recently announced production cuts or even production suspensions.
Volkswagen AG's plant in Zwickau, in eastern Germany, which is Volkswagen's largest electric vehicle plant, recently announced the suspension of production. A Volkswagen Group spokesperson said that the main reason for the suspension of production was the delay in the supply of parts in Ukraine, especially the lack of wiring harnesses for cars produced in Ukraine. The Porsche AG plant in Leipzig, Germany, a subsidiary of the Volkswagen Group, was also shut down on The 2nd.
A Volkswagen brand car dealership in Berlin, Germany, on May 7, 2020. (Xinhua News Agency, photo by Zhang Ping)
BMW spokesman said on the 3rd that due to the lack of automotive wiring harnesses, from the 7th, the factory in Dingolfin in southern Germany will suspend production, and the Regensburg plant will also begin to reduce production shifts due to the lack of chips.
Mercedes-Benz, a subsidiary of the Daimler Group, will adjust the production plan of its European plants from 7 July to avoid complete shutdown. The company said it was working with suppliers to find alternatives to auto parts made in Ukraine.
According to the Ukrainian Investment Promotion Agency, there are currently 38 factories set up by foreign companies in Ukraine to produce auto parts.
German auto parts supplier Leoni has two automotive wiring harness plants in western Ukraine, but production has been interrupted given the situation in Ukraine. Japan's Sumitomo Electric Industries co., Ltd. has also stopped working at its automotive wiring harness plant in Ukraine. U.S. auto parts giant Aptiv also announced that it will transfer all production capacity at its Ukrainian plant in the coming months.
The Russian-Ukrainian conflict also threatens the German auto industry with a shortage of raw materials. The Confederation of German Industries said that raw materials for automobile manufacturing will fall into shortages in the medium term and will lead to higher car prices.
Two pedestrians wearing masks pass by a Mercedes-Benz car dealership in Berlin, the capital of Germany, on May 7, 2020. (Xinhua News Agency, photo by Zhang Ping)
Peter Adrian, head of the German Chamber of Commerce and Industry, said car deliveries would be delayed due to a lack of palladium from Russia. Palladium is the raw material necessary for the production of catalysts, and about 20% of the palladium imported from Germany comes from Russia.
The German Automotive Confederation expects that the Russian-Ukrainian conflict is likely to affect the supply of inert gas neon, thereby affecting semiconductor production in Europe, which in turn will lead to serious disruption to automobile production.
Neon is an important raw material for the manufacture of chips. Mark Zandi, chief economist at Moody's Analytics, said russia and Ukraine together account for 70 percent of the world's neon production.
Stefan Bratzel, an analyst at the German Automotive Management Center, an automotive market research institute, said that due to rising energy and mineral oil prices, the cost of car production and use in Germany and even Europe will rise in the next few years.