The war conflict derived from the invasion of Ukraine by Russia is seriously affecting the European automobile industry from different angles. Firstly, many brands have decided to suspend the sale of their vehicles in Russia as a result of the economic sanctions imposed by Western countries and secondly, the production of cars, both in Russia and in the European countries closest to the conflict, is affected by supply problems.
Russia is the second European car market after Germany and the eighth in the world in volume with annual sales of more than 1.6 million cars. In Europe it is slightly above countries like France and Great Britain. Ukraine, meanwhile, is a smaller market, barely exceeding 100,000 units a year. Both are going to be affected in the coming months, the Ukrainian for obvious reasons as it is the scene of the war and the Russian as a result of the lack of components and international sanctions.
Some brands have already announced the cessation of their operations in Russia until further notice, including some luxury firms such as Aston Martin, Bentley, Porsche or Volvo, which was the first to announce its temporary abandonment of the Russian market. Honda, which had already planned to leave the country at the end of 2022, Nissan, Jaguar-Land Rover and Ford, which has suspended sine die its participation in the joint venture it has with the Russian commercial vehicle manufacturer Sollers, have also suspended their commercial activities. .
Production falls in Russia
As a consequence of the war there have been supply problems in most of the plants located on Russian soil. Volkswagen, for example, has stopped production at its Kaluga plant and the one it shares with the Russian firm GAZ in the town of Nizhny Novgorod, while Mercedes has suspended the shipment of parts for the production of Kamaz trucks, a brand of which is a minority shareholder. BMW has also temporarily closed the plant it has in the town of Kaliningrad where it produced about 12,000 cars a year.
Asian brands are also experiencing the same difficulties and both the Hyundai plant in St. Petersburg and the Toyota plant in the same town, the latter with the capacity to manufacture 80,000 cars per year, have temporarily suspended production due to the impossibility of having certain components. . Also Stellantis has had to stop its production in Russia for the same reason.
The European automobile group most affected by this conflict is, without a doubt, Renault, which owns the Russian company Autovaz (which markets the Lada brand) which has a market share in Russia of over 22% and represents 6.4 % of global group revenue. Renault has announced production stoppages both at its Moscow plant and, above all, at the large Togliattigrad factory.
Both Russia and Ukraine are exporting countries of raw material for the automobile industry. Russia is a major supplier of steel, aluminum and stainless steel and is one of the world’s leading producers of palladium. Palladium is a rare metal that is used in the production of semiconductors and catalysts. In addition, the country produces significant amounts of nickel and lithium, essential elements in the production of batteries for electric cars.
As far as Ukraine is concerned, this country produces between 80 and 90% of the neon gas used to manufacture semiconductors and the non-availability of continued production of this gas will entail an added problem for the production of these components that It was already affecting the industry worldwide in recent years and whose solution was not in sight until 2023, a period that is now once again in question. More information on the semiconductor crisis at this link.
In addition, numerous component firms that work for Western brands that produce in neighboring countries and in Eastern Europe such as Hungary, the Czech Republic, Slovakia or Germany itself are located on Ukrainian soil. For example, the Leonio company produces numerous complete car wiring harnesses at its Ukrainian plant. The Volkswagen group has announced temporary stoppages at its Zwickau and Dresden plants, where electric models are produced, at Audi’s in Germany, at Porsche’s in Leipzig and at most Skoda plants as a result of supply problems. . BMW has also announced stoppages at its plants in Germany and even at the British Oxford Mini.
The British and German brands are the ones that have most directly positioned themselves with respect to the crisis, following the positions of their respective governments and, in this sense, they have advocated in their communications for the immediate cessation of the conflict and in the case of brands such as Mercedes , Volkswagen and Skoda have made donations of up to one million euros for humanitarian aid in Ukraine.
Consequences of the crisis
One of the immediate consequences of this conflict will be the collapse of the markets of the two countries at war. In Ukraine, the market is obviously completely stopped while in Russia sales plummet due to difficulties in making payments and receiving imports from third countries.
Some analysts have pointed to Chinese brands as the possible great beneficiaries of the situation. The Russian market is clearly divided into two types of vehicles, premium and luxury, with a very important presence of foreign brands and which will fall completely, and cheap cars, a segment in which Chinese brands can take over from western ones. In January, both Chery and Great Wall, a firm of the Haval group, were already among the 10 best-selling brands in the country and China’s refusal to break commercial ties with Russia for the time being may allow brands of the Asian giant gain positions in the eighth world market.
