How the war in Russia is lowering global car production


The Russian invasion of Ukraine has caused auto industry watchers to lower production and sales forecasts for the next two years. Due to the crisis, factories in Eastern Europe have closed and the prices of already precious raw materials have risen.

Some factories in Ukraine have tried to continue during the invasion. Workers have reportedly had to interrupt their work to flee rocket fire.

In March, S&P Global Mobility, formerly IHS Markit, cut its global auto production forecast by 2.6 million vehicles in both 2022 and 2023 due to the conflict. The worst-case scenario was a total of as many as 4 million lost vehicles.

European car production is expected to fall by about 9% – about 1 million cars.

Some of that will be directly due to lost car sales in Russia and Ukraine, but those countries together make up a small part of the global car market – about 2% of the total in 2021.

The bigger concern is shortages of materials and parts already affecting European automakers and, the report warned, could spread to other markets if the war continues.

Separately, credit analysts at S&P Global Ratings are also forecasting global auto sales to fall 2% below 2021 levels by 2022. That is a sharp drop from the 4 to 6% sales increase for 2022 that the group last forecast in October 2021.

The report highlighted disruptions in the supply of critical auto parts from the region, perhaps particularly wire harnesses from Ukraine. Raw materials are also at risk – Russia produces about 40% of the world’s crude palladium – which is used to clean vehicle exhaust. The region is also a producer of nickel, which is used in batteries for electric vehicles. Even common minerals and metals, such as iron, are affected.

These are all important materials used to make cars.

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