According to investment management firm Neuberger Berman, the ongoing supply chain disruption in the automotive industry caused by Russia’s invasion of Ukraine is unlikely to be a long-term problem.
“Russia and Ukraine together make up only 2.1% of global small car sales, but the impact on some European OEMs is disproportionately greater than others, for example Renault. 22% of global sales, or 15% of operating revenue, comes from Russia’s AvtoVAZ, while most other European OEMs (Original Equipment Manufacturers) sell 1-2 in Russia / Ukraine. %, Which is a proportional operating revenue. ” Blog post..
Russia accounts for 40% of the world’s production of mined palladium used in catalytic converters that are essential in the manufacture of internal combustion engines. Ukraine accounts for 70% of the world’s production of neon gas required for lasers used in the manufacture of semiconductor chips.
Kyiv also makes up 7% of the wire harnesses used in vehicles. In addition, Italian and German OEMs use natural gas for processes such as heat treatment, paint hardening and casting. About 40% of the European Union’s natural gas supply comes from Russia.
With this reliance on Russia and Ukraine for the European automotive industry, it was inevitable that wars between nations would have a negative impact on this sector. But the crisis only “temporarily” disrupts the supply chain, Neuberger Berman said.
The industry is overcoming war and the consequent supply disruptions in many ways. In Ukraine, wire harness factories continue to operate with a production capacity of 30% to 70%. In Eastern Europe, OEMs are trying to secure an alternative source of palladium.
European countries are planning to reduce natural gas imports from Russia. For example, Italy has arranged to reduce Russia’s gas imports while increasing imports from Algeria. Chip makers have also accumulated neon gas inventories for several months.
Neuberger Berman expects the automotive sector to recover in the second half of 2022 as long as the conflict between Russia and Ukraine is resolved in the short term. However, the company warned that if the war were prolonged, recovery could be significantly delayed until 2023.
Mark Fulthorpe, executive director of S & P, predicts that new car prices in Europe and North America will remain high next year, while availability remains tight. To make matters worse, he predicts that higher prices for new cars will increase demand for used cars, which in turn will increase prices.
“Until inflationary pressures really start to erode consumer and business capabilities, it probably means that people who tend to buy new cars are ready to pay the highest amount,” Fullthorpe said.
S & P Global Mobility forecasts global vehicle production to be 84 million units in 2022 and 91 million units in 2023. After the war between Russia and Ukraine began, this was revised to 82 million and 88 million, respectively.