Ukraine war hits European automotive industry

Ukraine war hits European automotive industry
Business news |
The shock waves of the Russian invasion of Ukraine are also hitting the car industry - in several places: Production facilities are no longer accessible, the supply of components is faltering - and at the same time sales markets are being closed.
By Christoph Hammerschmidt

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Corona crisis, chip shortage, and now the war in Ukraine: the car industry and its suppliers are almost to be pitied. The war has already led to considerable distortions in the automotive supply chain from material suppliers to the OEMs themselves. And according to market observers, the car industry could face even more drastic problems as a direct and indirect consequence of the war: If factories and infrastructure in Ukraine are destroyed or masses of workers are lost due to the war effort, the crisis could quickly exceed what is economically bearable. Numerous suppliers operate production facilities in Ukraine or Russia, including Aptiv, Nexans, Sumitomo or Yazaki.

According to media reports, the manufacturer of vehicle wiring harnesses, Leoni, has closed its two Ukrainian plants. Numerous OEMs in Western Europe are supplied from there. The wiring harnesses are manufactured individually for each vehicle; this makes it difficult to relocate production to other regions of the world. Such an alternative response will take at least three months, they say. Since Leoni supplies numerous car manufacturers, many production facilities of practically all brands throughout Europe are affected.

Another example from the very beginning of the supply chain is platinum: the metal is needed, among other things, for exhaust gas catalytic converters as well as for various applications in electronics. Russia is the world’s second largest supplier of the metal after South Africa; customers must now prepare for supply bottlenecks.

But platinum is not the only problem material. “The war is causing additional great uncertainty in the import of raw metals and metal-bearing precursors,” “Manager Magazin” quotes Siegfried Rußwurm, president of the Federation of German Industries. Among other things, there could be a shortage of components for electric cars, it says. A recent survey by the Ifo Institute, a research institution, shows that 89 per cent of respondents in the car industry are facing procurement problems.

All these impediments add up and will quickly lead to production stoppages in the assembly of the cars. According to media reports, car manufacturers BMW and Volkswagen are particularly hard hit. As early as next week, there will be restrictions in final assembly at VW, and from the middle of March it is expected that production will have to be stopped completely. This applies not only to final assembly, but also to component plants such as those in Hanover and Salzgitter. According to Der Spiegel magazine, an internal VW task force is already working on cross-brand solutions. Cross-brand: This suggests that other brands of the VW group are also affected – according to Spiegel, Audi, Porsche, Seat and Skoda are also no longer able to produce at full capacity. Skoda has already admitted to problems with the production of the electric car Enyaq iV in the Czech Republic. Porsche plans to interrupt its vehicle production in Leipzig from Wednesday of the current week initially until the end of next week. Porsche builds the Macan and Panamera models at the Leipzig site.

The situation at BMW is similarly critical. The Bavarian car manufacturer has already experienced production stoppages; the plants in Munich and Dingolfing as well as the engine production in Steyr (Austria) are affected. Production at the company’s Mini brand in Oxford, England, is also affected. The company has formed crisis teams to source components from other parts of the BMW empire, which is spread across the globe, to minimise the production losses. At the same time, BMW has announced it will stop exporting finished cars to Russia. The same measure has been taken by the engineering supplier ZF, which is also currently not supplying components to Russia. The Russian truck joint venture ZF Kama is also not receiving any mechanical or electronic components.

 

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