Russia’s devastating war on Ukraine is bringing a whole set of new problems to the global auto industry, just as it was starting to recover from the pandemic and computer chip shortages
In this Monday, March 21, 2022, image made from video, Mark Wakefield, co-leader of AlixPartners’ global automotive unit, speaks during an interview with The Associated Press at the consulting firm’s offices in Southfield, Mich. Russia’s war on Ukraine is bringing new problems to the global auto industry. As Wakefield said: “You only need to miss one part to not be able to make a car.” DETROIT — — BMW has halted production at two German factories. Mercedes is slowing work at its assembly plants.
“You only need to miss one part not to be able to make a car,” said Mark Wakefield, co-leader of consulting firm Alix Partners’ global automotive unit. “Any bump in the road becomes either a disruption of production or a vastly unplanned-for cost increase.” Mark Fulthorpe, an executive director for S&P, is among analysts who think the availability of new vehicles in North America and Europe will remain severely tight — and prices high — well into 2023. Compounding the problem, buyers who are priced out of the new-vehicle market will intensify demand for used autos and keep those prices elevated, too — prohibitively so for many households.
The transformation of Ukraine into an embattled war zone has hurt, too. Wells Fargo estimates that 10% to 15% of crucial wiring harnesses that supply vehicle production in the vast European Union were made in Ukraine. In the past decade, automakers and parts companies invested in Ukrainian factories to limit costs and gain proximity to European plants.
“Long term,” Massaro told analysts, “we’ll have to assess if and when it makes sense to go back to Ukraine.” Fulthorpe said he foresees a further tightening supply of materials from both Ukraine and Russia. Ukraine is the world’s largest exporter of neon, a gas used in lasers that etch circuits onto computer chips. Most chip makers have a six-month supply; late in the year, they could run short. That would worsen the chip shortage, which before the war had been delaying production even more than automakers expected.
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