The first effects of the war in Ukraine began to appear in the auto sector, with factories in Russia halting and production slowing in Europe, and the situation may worsen further as Moscow continues its military intervention.
As the sanctions began to affect banks and logistics, production began to slow in Russia, and AvtoVAZ Group, the first car group in Russia and a subsidiary of the French company Renault, announced Thursday the suspension of work in its factories for four days “due to a supply problem in electronic components” that car companies have been suffering from since the beginning of 2021. .
According to “French”, work will also stop at the vast historic Togliatti site “south” that manufactures Lada cars, while the Renault plant in Moscow that produces SUVs for the local market has been closed since February 28. Also, the Korean Hyundai-Kia group, the second in terms of sales in Russia, suspended its plant in St. Petersburg until next week, explaining that the suspension of work was not related to the dispute but rather to the lack of components.
With the outbreak of the conflict, car sales were also suspended in Ukraine, which has a small market that recently moved away from Russian cars to European and Asian companies. On Thursday, Russian forces arrived in the “southeast” of Zaporozhye, where the country’s only car factory and the largest nuclear power plant in Ukraine and Europe are located.
The Russian market, still under-equipped, was promising for foreign car companies with the fall of the Soviet Union, and they set up assembly plants in it to avoid heavy import taxes.
And in May 2021, Tesla owner Elon Musk announced during a ceremony in the Kremlin that he might study a project to establish his fourth factory in the world in Russia, at a time when the electric car market is still in its infancy in this oil-rich country.
The market witnessed a breakthrough, but it collapsed in light of the 2009 financial crisis, and then it took a severe blow with the imposition of economic sanctions on Russia for its invasion of the Ukrainian Crimea in 2014.
1.5 million cars were sold in Russia in 2021, equivalent to sales in Italy.
Expert Ferdinand Dudenhofer pointed out in an analysis published by the Automotive Research Center in Duisburg, Germany, that Russia remains a “dwarf in the field of cars,” explaining that only 5 percent of the cars sold were made with Russian technology, while the rest of the cars depended on foreign companies. .
And “Toyota”, “Volkswagen”, “BMW”, “Mercedes”, “Volvo”, “Jaguar” and “Ford” last week also announced the suspension of its work for manufacture and delivery in Russia until further notice, citing logistical problems and the “situation”. current geopolitics.
Are Chinese companies replacing Western companies in Russia? “Chinese companies were basically gaining market shares by exporting cars to them, and this crisis may present an opportunity, unless the penalties they are exposed to are significant,” explains Felipe Muñoz of Gato Dynamics.
Dudenhofer believed that “China may enhance its loans and aid to Russia, which will make Russia orbit in China’s economic orbit,” expecting in this case the market to decline to 1.1 million cars by 2022.
Without China, it might drop to 800,000 cars, a level similar to 2015, which would put Russia behind Spain and Mexico.
The war is slowing car production in the West as well, and factories in Wolfsburg, the birthplace of the Volkswagen Group, will remain shutdown during the week of March 14 due to a shortage of supplies from Ukrainian suppliers.
In addition, the high cost of raw materials and energy, especially gas, as well as oil and electricity, may increase the costs of producing cars for all companies.
On the other hand, potential customers may be reluctant to buy cars at a time when companies are waiting for the market recovery to improve their profit margins and fund the transition to electric cars.
“During the crisis, people change their minds regarding buying a car, or put it off. This hesitation increases if the crisis takes on a regional dimension,” said Felipe Muñoz.
