Shutdown factories in Russia and slow production in Europe: automakers are already feeling the first effects of the war in Ukraine, and they could get worse.
As the sanctions begin to affect banks as well as logistics, production is slowing down in Russia. The AvtoVAZ group, number one in the country and owned by the French Renault, announced on Thursday the suspension of its factories for four days “due to problems with the supply of electronic components”, which manufacturers have been sorely lacking since the start of the year 2021.
The huge historic site of Togliatti, which manufactures the Lada, will therefore be stopped. The Moscow factory of the Renault group, which produces SUVs for the local market, has also been shut down since Monday, February 28.
The Korean group Hyundai-Kia, number two in sales in the country, also stopped its factory in Saint Petersburg until the week of March 7, assuring that this stoppage was not linked to the war but to the shortage of components.
With the war, the sale of vehicles is also suspended in Ukraine, a small market which had recently turned away from Russian brands to buy European or Asian cars. Russian troops were Thursday near Zaporozhye, where the country’s only car factory and its largest nuclear power plant are located.
Promising market
The Russian market, which remains under-equipped, was promising for foreign manufacturers with the end of the USSR: they built assembly plants there to avoid heavy import taxes.
In May 2021, Tesla boss Elon Musk even announced at a Kremlin event that he could consider manufacturing his fourth global factory on Russian land, while the electricity market is in its infancy in this country. oil-rich.
The market had taken off, but it crashed with the financial crisis of 2009, and took a hit again with the economic sanctions linked to the invasion of Crimea in 2014.
1.5 million cars were sold in Russia in 2021, as many as in Italy.
And Russia remains an “automotive dwarf”, underlines the expert Ferdinand Dudenhöffer, in an analysis published for the Center automotive research of Duisburg (Germany): only 5% of the vehicles sold are manufactured according to Russian technologies, the rest dependent of foreign companies.
Toyota, Volkswagen, BMW, Mercedes, Volvo, Jaguar or Ford also announced this week that they were suspending their operations (manufacturing and delivery) until further notice, citing logistical problems or “the current geopolitical situation”.
The global truck giant Daimler Truck has ended its collaboration with the Russian manufacturer Kamaz, which also supplies the Russian army.
Chinese succession
Could Chinese manufacturers take over from Westerners in Russia? “Chinese brands were already gaining market share by exporting cars there. This crisis could be an opportunity, unless the penalties incurred are significant,” said Felipe Munoz of Jato Dynamics.
“China could strengthen its credits and its aid to Russia, which would make it its economic satellite”, analyzes Mr. Düdenhoffer. The market would then drop to 1.1 million vehicles in 2022.
Otherwise, the market could drop to 800,000 sales like in 2015, putting Russia behind Spain or Mexico.
The war is also slowing down vehicle production in the West: the chains of the Wolfsburg factory, the cradle of the Volkswagen group, will be shut down the week of March 14, due to lack of supplies from Ukrainian suppliers.
The rise in the cost of raw materials and energy (particularly gas, but also electricity and oil) could also make car production more expensive for all manufacturers.
In addition, uncertainty could win over potential buyers, while manufacturers are waiting for the market to recover to improve their margins and finance their electrification.
“During a crisis, people change their mind about buying a car, or postpone their purchase. Even more so if the crisis becomes regional,” underlines Felipe Munoz.