Automotive > Powertrain, Body, Chassis & Safety Blog

Ukraine War Disruption to Automotive

by Kevin Mak | Mar 04, 2022

The Russian invasion of Ukraine is causing a number of issues that will affect the automotive sector:


Further acceleration towards electrified vehicles

  • Energy prices, in general, will increase, making the drive for more fuel economy or for electrified vehicles even greater.
  • Platinum prices will increase given that Russia is the second largest producer of the metal, used in catalytic converters.


Raw material prices will risk profitability

  • Nickel prices will increase ($100,000/ton in March 8th, 2022), given that the largest producer of high-grade nickel, Norlisk of Russia, would face trade sanctions.  Indonesia has also banned the export of nickel ore, requiring the processing of the metal in its country, thus requiring capital expenditure from nickel suppliers.  Nickel is used in battery cathodes, as well as coatings or in alloys for rustproofing parts, such as axles, car bodies, drive shafts, exhausts, gears and wheels. 
  • However, alternative metals and battery chemistries are also being used or sought after, but demand for those will also increase (aluminum up 60 percent).
  • Carbon black, of which a third of the world's supply comes from Russia, will affect supplies of rubber components. 
  • Auto groups, such as BMW and Volkswagen, have warned that if the war in Ukraine continues, it could pose a risk to profit margins in 2022.
  • Automakers are already beginning to increase prices for their new vehicles. 


Slight risk to semiconductor supply

  • Neon gas prices could increase as production at Ukrainian company Cryoin is disrupted.  Neon is used in laser etching for semiconductors.  However, the Netherlands company Cyner is an alternative source for neon.  Only 5 percent of Japanese imports come from Ukrainian supply.


Lack of Ukrainian supplies to affect vehicle production elsewhere

  • Leoni's wire harness production plants in Ukraine have closed, causing supply chain issues for customers, such as Volkswagen Group and its MEB platform-based models (370,000 European production in 2022). 
  • Other supply chain issues also affecting BMW, Mini and other OEMs.


Russian light vehicle production will fall

  • Joint venture and local production of light vehicles by global OEMs will close.  Worst affected will be Renault with its 67.6 percent ownership of AvtoVaz (Lada) and production by Avtoframos.  Also affected will be BMW, Kia and General Motors (Avtotor in Kaliningrad), Ford (Ford-Sollers near St. Petersburg), Hyundai (St. Petersburg), Mercedes-Benz (Moscow), Stellantis-Mitsubishi (Kaluga), Toyota (St. Petersburg) and Volkswagen (Kaluga, Nizhny Novgorod). 
  • Lack of supplies have forced Geely to stop production at a plant in Belarus, affecting 30,000 units of light vehicle production a year.
  • Affected will be vehicle production previously forecasted at 1.6M units (1.9% vs world) in 2022 increasing to 2.3M (2.2%) in 2028, electronic systems at $3.4B (10%) growing to $5.3B (9%), ECUs at $1.1B (10%) growing to $1.7B (11%), sensors at $290M (1.1%) growing to $416M (1.3%), semiconductors at $498M (1.0%) growing to $979M (1.0%).
  • LMC Automotive is to revise its light vehicle forecast by -2M units each year 2022-2024, mostly affecting Russia, but also in other parts of Europe as existing supply chain issues affect production levels and inflationary issues could also affect consumer demand. 
  • Fuyao Glass report that its Russian operations have stopped and its supply re-sourced from Chinese facilities, as they only contribute 2 percent of its business, as demand from Russian customers have stopped. 
  • General support for Russian consumers will also stop, putting vehicles at risk from lack of maintenance or even operability, such as lack of OTA updates or vehicles "bricking" and made unusable.


Exports of light vehicles to Russia will stop

  • Exports of light vehicles will stop, as the falling ruble and suspension of SWIFT payments makes them commercially unviable.  Exports of components for production in Russia, the aftermarket or maintenance will also stop. 
  • 243,000 cars were imported into Russia in 2020, mainly premium sector models.


Uncertainty of automotive R&D in Ukraine

  • Examples include Annotell (object recognition software for AVs), Enerize (batteries) and Luxoft/DXC (IVI software). 
  • 20 software engineers from Chargepoint in Ukraine are unaccounted, as well as 3 staff from Stellantis.


Increased cyberattacks

  • Damaging companies’ ability to operate, such as Toyota’s ability to assemble vehicles.


Delay to OneWeb satellites

  • Launches of the OneWeb satellites have stopped following Russia’s concerns they would be used for espionage.  The decision to stop the launches was welcomed by the UK government, a stakeholder of OneWeb, following the invasion of Ukraine.


Possible disruption to Russian autonomous driving development

  • Cognitive Pilot and Yandex could be barred from developing their autonomous driving systems outside their home market, Russia.  The latter currently has a partnership with Grubhub with last mile delivery robots operating in US college campuses.  Any restrictions placed on Yandex will also have impact on Uber, as Uber sells off its stake in its joint venture with the Russian company.
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