Production of the iX electric SUV at BMW's factory in Dingolfing, Germany, where assembly has been halted after deliveries of wire harnesses from Ukraine were disrupted.
PARIS -- Russia’s invasion of Ukraine is likely to mean a short-term production loss of 50,000 to 100,000 units in Europe due to parts shortages, notably wire harnesses assembled in Ukraine, analyst company Auto Forecast Solutions said.
The initial work stoppages – reported by Volkswagen Group, BMW, Mercedes-Benz and others – are expected to last several weeks as automakers seek alternative sourcing to resume production, Auto Forecast Solutions said in a report on Monday.
Click here for a roundup of how Russia’s invasion of Ukraine is impacting the auto industry.
Looking ahead, “Many plants, in Europe and around the world, will see more downtime in the weeks and months going forward,” the report said, noting that lost production in Europe should be “recoverable” once alternative parts sourcing is found.
Analysts are also dialing back their sales forecasts. LMC Automotive said Tuesday that it expects Western European auto sales to rise by 3.6 percent this year, to 10.96 million units, just 170,000 more than in 2020, when the coronavirus pandemic led to widespread factory closures and lockdowns.
“Our 2022 passenger vehicle forecast has become more cautious since last month as supply bottlenecks are expected to be exacerbated from Russia’s invasion of Ukraine and the resulting sanctions,” LMC said, also noting that inflation and lowered consumer confidence will have an effect on demand.
The conflict-related stoppages come atop the continuing shortage of semiconductors, which cost automakers millions of units in lost production in 2021, and is expected to continue through 2022, although supply bottlenecks are forecast to ease over the year.
But even the semiconductor industry – largely focused in Asian and North American “chip foundries” – will be affected by the war in Ukraine. The country produces at least half of the global supply of neon gas, which is used to power lasers used to etch patterns into computer chips.
In 2014, when Russia annexed Crimea, Ukraine accounted for 70 percent of neon production, but chipmakers have been working to diversify their sourcing since then.
While European auto production and sales are likely to take a hit from the conflict, the Russian auto industry faces much more severe consequences. Plants in the country have a total capacity of more than 2 million vehicles, Auto Forecast Solutions said, with a 2022 production forecast of about 1.5 million units. But stoppages – either from parts shortages or due to sanctions – will mean an “unrecoverable” loss of 760,000 to 815,000 units, the report said.
Sales fell in February by 4.8 percent, according to trade group AEB, with sharp drops by market leader Lada (controlled by Renault Group), which was down 21 percent; No. 6 Volkswagen (-18 percent); No. 7 Skoda (-23 percent); and No. 8 Nissan (-12 percent).
The war is likely to accelerate a pullout from Russia’s volatile market by foreign automakers that began in the 2010s, led by GM and Ford Motor. “Over the last decade, the promise of Russia has not panned out as quickly as expected,” Auto Forecast Solutions said. “Russia’s invasion provides a good cover for any vehicle manufacturer looking for a reason to escape.”
That may not be so easy, as Reuters reported recently. Companies essentially have three choices: Continue operations as usual; leave and hand over factories to local managers; or face seizure by the Russian government.
One possible analogy is the on again, off again sanctions on Iran over its nuclear weapons program. The reimposition of sanctions in 2018 after the U.S. withdrew from the nuclear agreement resulted in PSA Group and Renault pulling out of the country after investing hundreds of millions with local partners after the deal was signed in 2015.
