The European automotive industry is facing challenges amid the ongoing war in Ukraine, impacting supply chains and production. While Volkswagen is increasing production in Germany, and Skoda reports the resumption of its Ukrainian wiring harness supplier, other automakers are grappling with disruptions.
Ford has halted production of its Fiesta and Focus in Germany due to supply chain disruptions, extending to a suspension of orders for Tourneo Connect, Galaxy, and S-Max manufactured in Poland and Spain. Nissan also stopped production at its St. Petersburg plant in Russia for three weeks due to parts shortages.
The Russian government has threatened to nationalize assets of companies halting production there. Ford, Hyundai, and Toyota have suspended Russian production, while Renault, owner of Russian automaker AvtoVaz, has continued operations.
Volkswagen is resuming a second shift for Golf production in Wolfsburg and plans to expand to three shifts. However, its Zwickau and Dresden plants, specializing in electric vehicles, will take more time to return to normal, with Zwickau potentially coming back online in April.
The Group Volkswagen is seeking additional wiring harnesses from various locations, including Romania, Hungary, Tunisia, Morocco, Mexico, and China. Skoda, a Volkswagen brand, mentioned in its 2021 earnings presentation that its Ukrainian supplier has resumed production.
The invasion of Ukraine by Russia has disrupted automotive supply chains, particularly for wiring harnesses. Ukraine is a key source for automakers, providing critical components due to its geographic proximity, lower labor costs, and skilled workforce. Wiring harnesses, bundling up to 5 km of cables in an average car, are unique to each vehicle model, and finding alternative suppliers may take months.
Beyond wiring harnesses, automakers rely on Russia for raw materials such as nickel, a crucial component in electric vehicle (EV) batteries. The invasion’s fallout could lead to increased costs for EVs. S&P Global Mobility reports that raw material costs for EV batteries may surge, adding $8,000 per vehicle for the Tesla Model Y and $11,000 for the Mercedes-Benz EQS.
Nickel prices have become volatile, reportedly rising from $30,000 per ton on March 7 to $100,000 per ton just a day later. With manufacturers shifting towards nickel as a cobalt substitute, given concerns about human rights abuses in Congo, the primary global cobalt supplier, these price fluctuations pose challenges.
S&P Global Mobility has revised down its 2022 global vehicle production forecast by 2.6 million units, anticipating a similar decline in the following year. The complex geopolitical situation is impacting the automotive industry on multiple fronts, affecting production, supply chains, and material costs.
