As the Ukraine conflict worsens, the auto sector, including automakers and component suppliers in the United States, Europe, as well as Asia, are expected to suffer significant collateral damage. But as the crisis escalates, the Indian auto industry may not see any direct impact because of the situation.
Russia is a major supplier of numerous important metals used in auto manufacturing around the world, including palladium and nickel. It also has a significant manufacturing base, which includes a number of foreign-owned plants such as Stellantis, Volkswagen and Toyota.
It is now believed that with at least a quarter of the parts used in Russian-made automobiles coming from overseas — notably the United States which has imposed new sanctions targeting the Russian economy— those assembly plants may struggle to stay open while sanctions are in place.
Additionally, Russia is the world’s third-largest source of nickel for lithium-ion batteries, and it supplies 40% of the palladium used in catalytic converters, which are present in all gasoline and diesel automobiles. However, if nickel resources are limited, the production of batteries for electric vehicles may be slowed.
It is believed that automakers would have to find alternate supplies if Russian President Vladimir Putin retaliates against the West by cutting off supply, or they would be unable to produce automobiles with internal combustion engines.
Meanwhile, several corporations, including automakers Volkswagen, as well as Renault and tyre maker Nokian Tyres, announced intentions to close or move manufacturing units.
Amsterdam-based automotive manufacturing corporation Stellantis had been ramping up manufacturing of vans as well as other vehicles for sale to the West at a plant outside of Moscow and was also considering starting to export transmissions. However, CEO Carlos Tavares stated that his organisation may have to reconsider its strategy.
Additionally, Volkswagen, one of the European automakers operating in Russia, said in a statement that the degree of impact on the commercial activities in the affected nations is regularly determined.
Sumitomo Electric Industries, a Japanese car supplier that employs 6,000 people in Ukraine to create wire harnesses, said it had halted operations at its Ukrainian factories and was in talks with clients about possibly substituting supplies from other sources.
Indian Auto Industry
Currently, the Indian auto industry doesn’t see any direct impact because of the situation, but the companies are reportedly monitoring the situation. For example, Maruti Suzuki said that currently the company doesn’t see any direct impact on the business but at the same time, it would keep an eye on the situation.
But what is more concerning is the rise in oil prices. This would undoubtedly damage consumer-buying behaviour, particularly in the two-wheeler industry, which is already under pressure due to reduced sales and rising vehicle prices.
Tractor exports, particularly those with lesser horsepower, could be affected. According to experts, while tractor businesses with limited exposure to Ukraine markets have completed current orders, they may not accept new orders until the situation improves.
Similarly, in the case of the EV industry, it is believed that there may be some headwinds, while the EV customers may proceed with their plans unless input price hikes are passed on to them, which is unlikely in the near future, whereas ICE 2-wheeler buyers may postpone purchases if fuel costs rise.
It should be noted that the conflict between Russia and Ukraine comes at a time when the auto sector is recovering from the blow of the Covid-19 pandemic and the industry is facing an ongoing global semiconductor crisis.
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