According to estimates by automakers in the United States of America, Russia and Ukraine are not included in the list of the top 100 auto parts manufacturers in the world. Nevertheless, the impact of the Russian-Ukrainian war on the auto industry and its future remains so strong that some experts believe that The ongoing fighting might reshape the global auto industry.
Regardless of this conviction, which others consider exaggerated, the vast majority of auto industry experts admit that Western sanctions, which have been subjected to Russia, as one of the world’s leading metal producers, have left – and will leave – uncomfortable imprints on the auto industry. Which is experiencing many difficulties, and is going through a crucial stage in its development as a result of international efforts to move from the world of traditional fuel-powered cars to the age of electric cars.
Perhaps the first negative impact of that war on the auto industry is of a partial and not comprehensive nature, in the sense that it does not affect the entire industry, but rather relates to some of the leading companies, which suffered huge financial losses as a result of their loss to the Russian market, which absorbs a large part of its production.
The biggest loser so far as a result of the loss of the Russian market was the French company Renault, and despite the company’s silence and non-commentation, it lost between 17% and 25% of its market value as a result of Russian military intervention and international sanctions, where Russia is the second largest Renault’s largest market.
France’s Renault is followed in losses by the South Korean Hyundai group, which owns 27.2 percent of the Russian automaker AvtoVAZ, in addition to the German Volkswagen, which accounts for 12.2 percent of car production in Russia.
Nevertheless, Tom Oliver, an expert in the field of international marketing, says that the car market in Russia is not promising, which might greatly affect the course of the car industry.
He told Al-Eqtisadiah that “the Russian car market absorbs between 1.6 million cars annually to 1.8 million, this percentage does not represent more than 10 percent of car sales in the United States, and regarding 2 percent of global sales, and if global sales amount to 82.4 million cars this year, the loss of the Russian market is not expected to leave negative imprints on overall global sales.”
“However, the contraction of the Russian car market might cause severe sales difficulties for some European companies such as Renault and Mercedes, which are the preferred car of the upper Russian classes,” he added.
When talking regarding the ongoing war in Ukraine and its impact on the global auto industry, the impact may appear more clearly in forcing the war on car manufacturers to reduce production, as a result of stopping deliveries of certain types of electric cables used in cars, which are produced in Ukrainian factories for the benefit of many manufacturers. European cars, and this damage has become clear to the German company Volkswagen, as the production of the Audi model of the group has decreased.
He says to the “Economist” engineer L. bad. Dean, head of research at British car maker Vexhall, said, “The European car industry will be affected more and faster than its American counterpart as a result of the war and sanctions, as many European companies rely on connecting wires made in Ukraine, and the withdrawal of European companies from the Russian markets means a sharp decline In its production, the production of cars in Russia and Ukraine is currently expected to halve, and this represents a huge loss for car manufacturers.”
Although Russia and Ukraine are not major players in global supply chains, the problem is that you can’t make a car if you’re missing one part out of the thousands of parts that are used to make it.
The German Automobile Manufacturers Association (VDA) announced that the Russian-Ukrainian war had disrupted transportation routes, as well as financial transactions, and that the industry would face a shortage of a range of raw materials.
She also said the impact of the conflict on shipping, rail and air freight had exacerbated problems in the supply chain at a time when inventory levels were already low.
And Mercedes-Benz has announced that it will reduce production at some of its European plants, due to the decline in supplies of parts manufactured in Ukraine, and used in the manufacture of cars.
However, Dr. Carol Rollad, Professor of Manufacturing Models at the University of Cambridge, believes that the biggest challenge for the auto industry is how to deal with the expected rise in the prices of many key and essential metals in the industry, whether for cars that run on fuel or electric cars and a large part Of those minerals sourced from Russia.
War and sanctions might hamper supplies of raw materials from Russia. These include palladium, which is used in pollution control equipment in oil or gas cars, as well as nickel, which is essential for electric car batteries, and Ukraine is a major source of neon gas, which is used to make chips. e.
Dr. Carol Rollad assures the Economist that the London Metal Exchange suspended trading of nickel a few days ago following the metal prices rose 250 percent, and prices doubled to a record level of $ 100,000 per ton, and all this is due to the Western sanctions imposed on Russia, which are considered A major producer of metal.
While engineer Bras Victor, a consultant in a number of electric car manufacturers, believes that the future of electric cars is now cloudy as a result of sanctions once morest Russia.
He told Al-Eqtisadiah that “nickel is used in the manufacture of stainless steel, and if we take into account that regarding 40 percent of a medium-sized car consists of steel, and that Russia produced 108 million tons of iron last year, which is the fifth largest producer in the world of ore. Iron, Russia cannot be ignored when talking regarding the auto industry.”
He added, “Also, nickel is a large component in electric car batteries, and Russia produces 5 percent of the total global production, and the Russian Norilsk Company is the largest producer of nickel in the world, and manufactures regarding 17 percent of high-quality nickel in the world, and Russia provides 20 percent of the needs of The global market for high-grade nickel, and for these factors, the automotive industry, both conventional and electric, is facing a real threat.”
It is known that nickel is a major component in the electric car battery industry, as batteries are one of the most expensive parts of an electric car, if not the most expensive component in it. Global demand for conventional cars is also a result of high gasoline and gas prices as well.
The problems of car manufacturers are further complicated by the fact that many of the raw materials necessary for the industry come from Russia, not just nickel, as aluminum represents an average of 11 percent of the total metals used in the manufacture of cars, and Russia is the sixth largest global exporter of aluminum, and the markets were even before the outbreak of the war In Ukraine, it is facing a clear deficit due to the suspension of production in one of the largest Chinese factories, and therefore the markets are likely to witness a significant shortage of the metal, whose prices have risen by 25 percent.
Palladium, which is essential for both electric and fuel vehicles and represents the vast majority of global car sales, also comes from Russia, which accounts for 40 percent of the global market, and prices for the metal have recently risen 61 percent.
Some attribute the German position, which does not show the same degree of urgency as the American and British side, to impose complete isolation on the Russian economy, not only because Germany needs Russian energy resources such as gas and oil, but also because Russian companies are among the main suppliers of minerals to German industries, especially The automotive industry, in 2020, Russia supplied Germany with 44 percent of its needs of nickel, 41 percent of its titanium, a third of its iron requirements, and 18 percent of its palladium.
For his part, Dr. George David, professor of industrial economics, told Al-Eqtisadiah, “The danger lies in the fact that there is intense competition between the United States and European countries on the one hand and China on the other hand, with regard to the automobile industry in general and electric in particular, and the deprivation of the American auto industry. European and Russian minerals as a result of the sanctions, bearing in mind that no direct sanctions were imposed on the Russian production of minerals, but there are many financial sanctions, which impede the purchase process. Electricity is in China and denied by the West, which puts China in a better position to develop its industry of electric cars, especially electric cars, and this means a complete change in the structure of the global auto industry, given the leading role that the electric car industry will play in the future within the industry as a whole.
Available estimates so far indicate that the average cost of a new car increased in the United States of America by regarding 13% last year, and it might also rise this year by 20% due to the significant increase in the cost of production, which means higher car prices.
In turn, he assures “the Economist” Simon Black Smith, professor of international trade at the University of London, that these types of supply shocks might have been absorbed by the global economy or a large part of them in a non-inflationary environment.
He says, “But now and for many months we are facing an inflationary environment for many factors, and things have deteriorated further as a result of the war in Ukraine. Car prices will not only rise due to the lack of supply of major minerals in the markets, there is also a rise resulting from the increase in the cost of transportation, as 90 percent of the goods Imported in the United States arrives in containers.”
He points out that the current challenge for the auto industry is very complex, and will require the managements of major companies to reconsider their long-term strategy, given that the current sanctions may extend for decades before things return to what they were before the Russian-Ukrainian war.
