A tough choice for automakers in Russia
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Fighting in Ukraine continues.
Suspending, leaving, or restarting is a tough decision for automakers doing business in Russia.
Since the escalation of the Russian-Ukrainian conflict on February 24, 2022, automakers including Ford Motor, BMW Group, Renault Group and Volkswagen Group have suspended operations in Russia.
The most recent addition is the Stellantis Group. On April 15, its joint plant with Mitsubishi Motors in Russia suspended production. Few automakers are still operating in Russia.
The roof leaked during the overnight rain. Sales in the European auto market fell sharply in March due to a shortage of spare parts from Ukraine, especially wiring harnesses. This is the ninth consecutive month of downward trend in new car sales in Europe.
According to data released by the European Association of Automobile Manufacturers (ACEA) on April 20, the number of new car registrations in the European Union, the United Kingdom and the European Free Trade Association (EFTA) in March this year was 1.13 million, down 19% year-on-year.
Bloomberg Intelligence analyst Michael Dean wrote in a note: "Shortages of parts and production stalls linked to the war in Ukraine will limit car supply and delay the expected recovery in sales." ”
Forecaster LMC Automotive has cut its growth forecast for Western Europe to just 0.4 percent, expecting full-year deliveries of just 10.63 million units, well below the pre-pandemic 14 million units.
In March, registrations in the EU's major markets declined. Among them, France fell by 20%, Germany by 18%, and Italy and Spain by 30%.
There are also retrogrades. Continental said on April 19 that it had temporarily resumed production of passenger car tires at the Kaluga plant in an effort to protect local executives or employees from criminal charges.
▍ Volkswagen Group: A tough decision
Herbert Diess, ceo of Volkswagen Group, said the group's new growth plan aims to reduce the vulnerability of supply chains, such as the impact of global conflicts such as supply disruptions and price increases, by delegating more power to its regions and brands.
In an article LinkedIn, Dies wrote: "Recent geopolitical changes, as well as increased regional structures, have exposed our vulnerability across the globe, especially in the United States. ”
Diess did not specify which political events were, but as Western sanctions pushed up energy and raw material prices, the Russian-Ukrainian conflict dealt a heavy blow to the Volkswagen group.
Volkswagen Group warned last week that it was feeling the impact of rising prices and supply chain bottlenecks, with deliveries falling 37 percent in March from last year.
Due to the shortage of wiring harnesses produced in Ukraine, the launch of the Volkswagen ID.5 electric crossover was postponed from April to May. While the group is trying to increase the sales of electric vehicles in the Chinese market, its production has been hampered by the impact of the epidemic.
The Volkswagen Group Board of Directors considers the upgrading of its business in China, the development of the software division Cariad, and the restructuring of the brand leadership structure to be the most pressing issues facing the company.
The Chinese market accounts for about 40% of Volkswagen Group's sales. But in the electric vehicle market, Volkswagen Group lagged behind local competitors and failed to achieve the sales target of 80,000-100,000 electric vehicles in 2021.
The Volkswagen Group will unveil more details in the coming weeks, detailing how it will evolve from a classic OEM company to a vertically integrated mobility company.
"Our competitors are no longer Mercedes-Benz, Toyota or The Stellantis Group, but Tesla, Foxconn, Apple, LG Electronics, Uber and others." Dees said.
In an interview with the US television network CBS News Magazine 60 Minutes on the evening of April 17, Dies said: "This is a very difficult decision for us because we have about 7,000 loyal employees in Russia. We have 3 factories there. Over the years, we have also formed a customer base. So, it was a very tough decision. But participating in sanctions may be our only path at the moment. ”
On April 14, Volkswagen Group said it initially expected operating margins to jump to 13.5 percent in the first quarter from 7.7 percent in the same period in 2021, but the impact of the war in Ukraine and supply chain bottlenecks remains uncertain.
"At present, it is still impossible to fully predict the impact of the further development of the war in Ukraine. Therefore, the war may still have a negative impact on the commercial activities of the Volkswagen Group. It is estimated that it will be affected by supply chain bottlenecks. Volkswagen Group wrote in a statement.
▍ Stellantis Group: Production stopped at the Russian plant
On April 15, Eric Laforge, head of Stellantis Group's European light commercial vehicle division, told Automotive News that its Russian trucking plant had stopped production due to running out of spare parts.
After the conflict between Russia and Ukraine escalated in February, stellantis group had said it would suspend the import and export of cars from Russia. The group, in partnership with Mitsubishi Motors, operates a small-truck factory in Kaluga, 180 kilometers southwest of Moscow, producing medium-sized pickup trucks for brands such as Citroën, Opel and Peugeot.
Carlos Tavares, ceo of Stellantis Group, said at the end of March that the Kaluga plant may have to stop production due to reduced supply of parts. On April 15, Eric told Automotive News that the plant had stopped operating.
Since the beginning of the war in Ukraine, automakers including Ford Motor, BMW Group, Renault Group and Volkswagen Group have suspended or stopped operations in Russia.
Stellantis Group said it had suspended its manufacturing operations in Kaluga in view of the cross-sanctions and increased logistical difficulties to ensure full compliance with all cross-sanctions and to protect employees.
The Stellantis Group has relatively little operations in Russia, with its Kaluga plant producing about 11,000 units last year. The company had planned to export trucks to Western Europe and assemble Fiat-branded trucks in Western Europe.
Eric said stellantis group will increase truck production at its Hordain plant in northern France to replace Lukaga's planned exports.
The Stellantis Group and Mitsubishi Motors own a plant in Kaluga, Russia. The plant is owned by the joint venture PCMA Rus, with the Stellantis Group holding 70 percent of the shares and Mitsubishi Motors 30 percent owning the shares.
Mitsubishi Motors wrote in a statement: "Due to logistical difficulties, auto exports and parts supply to Russia have been suspended since March. ”
The plant, which is owned by the Stellantis Group's Citroën, Opel/Vauxhall and Peugeot brands, produces Pajero and medium-sized commercial pickup trucks.
Stellantis Group said at the end of March that it would have to close the Kaluga plant if it ran out of parts, but its spokesman declined to tell Automotive News whether production would continue.
The Stellantis Group will move some of Kaluga's pickup production to the Hordain plants in France and Luton, England, and freeze more investment plans in Russia. However, the production of small trucks in Kaluga is reserved for use only in the local market.
In March, new car sales in Russia fell 63 percent, shrinking for the ninth consecutive month. The reason is that the industry has suffered severe shortages, as well as the sharp fall of the ruble and logistics disruptions have led to soaring prices.
▍Hyundai Motor: Sales in Russia fell by nearly 1/3
Hyundai Motor Group expects profit to rise 4 percent in the first quarter of 2022, but this performance is largely due to the sharp depreciation of the Korean won, partially offsetting the chronic shortage of chips, the decline in sales in the Russian market, and the negative impact of rising raw material costs.
Hyundai Motor Group will report a net profit of 1.37 trillion won ($1.11 billion) in the quarter ended March 31, up from 1.32 trillion won in the same period last year, according to a survey by Financial Research Institute Refinitiv SmartEstimate.
But analysts also said that the continued shortage of chips around the world remains a major problem facing Hyundai Motor Group. In addition, the automaker is under pressure from other sources, with some parts sourced from China facing shortages due to the lockdown.
Kim Jin-woo, an analyst at South Korea Investment Securities, said: "The weakening of the Won is a key booster for Hyundai Motor Group. The decline of the Won is fast enough to offset the shortage of chips, the soaring price of raw materials, the War in Ukraine, and all other problems. ”
From January to March this year, the South Korean won fell nearly 7% against the dollar from the same period last year, falling to a nearly two-year low.
Hyundai Motor Group sales data shows that in the first quarter of this year, the sales of cars produced at its Russian plant plummeted by nearly a third. The cars produced at the plant are used both for domestic sales and export in Russia.
Hyundai Motor Group (including Kia Motors) has a market share second only to Renault Inc. On March 1, Hyundai Motor Group suspended operations at its Assembly Plant in St. Petersburg on the grounds of parts delivery issues. No decision has been made on when to resume operations.
Kim Jin-woo said: "Hyundai Motor Group will inevitably be hit by the conflict between Russia and Ukraine. Because they have to continue to pay for maintaining Russian operations, but they can't sell so many cars. ”
▍Continental: Restart production in Russia
Continental has temporarily resumed production of passenger car tires at its Kaluga plant in Russia. According to Continental, the move is intended to meet local needs without violating sanctions imposed on Russia.
On March 8, Continental announced the suspension of production at its Kaluga plant.
Continental said its products are produced on the principle of "civilian purposes" and that "if local demand is not met, our employees and managers in Russia will face serious criminal consequences".
Continental did not elaborate on the allegations employees may face. However, the group further stated: "In order to protect employees in Russia from prosecution, if necessary, the Kaluga Tire Factory will temporarily resume the production of passenger car tires for the local market." ”
Continental's resumption of production was not motivated by profit considerations. "The original intention of this is out of the duty of care for our employees in Russia."
On April 21, Continental lowered its annual profit forecast and warned that if the war in Ukraine did not ease, it would have a "lasting impact" on production and supply chains, with rising energy and raw material costs weighing on profit margins. "If the geopolitical situation, particularly in Eastern Europe, continues to be tense or deteriorates, it could have a lasting impact on production, supply chains and demand."
Continental expects profit margins to be between 4.7% and 5.7% this year, lower than previously expected to be between 5.5% and 6.5%. Headquartered in Hanover, Germany, Continental ranks 6th among Automotive News' top 100 global suppliers, with sales of $29.7 billion in 2020.
(Part of this article is reported by Automotive News and Bloomberg, and some of the pictures are from the Internet)