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The war in Ukraine deepens the problems on the world car market


The pandemic and the associated supply chain rupture, the shortage of semiconductors needed to make cars, and now the aftermath of the war in Ukraine are seriously affecting the global car industry, say analysts at Santander Bank Polska.

The first and most notable consequence of the war in Ukraine was a significant reduction in the supply of electric harnesses. Analysts note that our country was a European center for the production of cable products for the automotive industry. Almost half of the worldʼs leading manufacturers used products from factories located in Ukraine. Before the war, Ukraine produced wiring harnesses for 0.5 to a million cars a year, or 4-9% of all cars manufactured in Europe. A significant proportion of products were exported to plants of German corporations, such as the Volkswagen Group, BMW or Mercedes, which had to reduce or completely stop production of some car models.

According to experts, due to the current situation, in the coming months there may be a loss of several percent in car production in Europe. Although some Ukrainian plants have recently resumed production, in the face of the uncertainty of this business during the war, automakers and suppliers are trying to relocate production or increase plant capacity in other countries, such as Morocco and Romania. However, this process can take several months.

Another significant risk is the reduction in the supply of neon, a technical gas used in semiconductor production. Factories in Mariupol and Odessa provided about half of the worldʼs supply. Although semiconductor producers are trying to stockpile this gas and diversify their sources of supply, there is a significant threat in this sector.

Also, due to Russiaʼs invasion of Ukraine and the world, there may be a shortage of metals. In particular, Russia extracted about 40% of the palladium used in catalysts and semiconductors, and supplied the EU with the nickel needed to make batteries. Now the countries of the European Union will have to urgently look for an alternative to the products of the aggressor country. In addition, the war could also reduce the availability of aluminum and steel, experts say.

But in terms of exports of spare parts and cars, Russia does not matter much, experts say, so the EU car industry will easily survive the rupture of trade relations with the occupiers. Renault Group and Skoda may feel the biggest loss in the market.

According to IBRM Samar

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