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Concern grows that Russian invasion of Ukraine could impact the auto industry

Ukraine & Russia are major sources for automotive raw materials
Posted at 11:20 PM, Mar 03, 2022
and last updated 2022-03-03 23:20:23-05

SOUTHFIELD, Mich. (WXYZ) — How will Russia's invasion of Ukraine impact the auto industry?

We have seen how supply shortages can impact the auto industry. The pandemic led to an increase in demand for computers and mobile devices - while simultaneously slowing the shipping of supplies needed to make semiconductor chips. Automakers made cars and stored them, waiting for chips.

It continues to mean there are fewer vehicles for car buyers to choose from.

“So that is creating shortages on certain vehicle lines. The priority right now is on vehicles that are ordered,” said Edmond Douglas, VP of Operations at Avis Ford on Telegraph in Southfield.

He says he is concerned that war will make it worse.

“I definitely hope for peace,” said Douglas.

“There are some serious implications for the automotive industry that we are just beginning to see from this situation,” said Janell Townsend, a Professor of Marketing and International Business in the School of Business Administration at Oakland University.

Professor Townsend says commodities from Russia and Ukraine go into cars around the world. From aluminum in auto bodies, palladium in catalytic converters, to the raw materials in batteries for electric vehicles.

“For example? Battery production. Lithium and Nickel come from Russia,” said Professor Townsend.

“Then some other materials that you often don’t think about. Neon. Something like 80 to 90% of global neon supply, which is not just for bar lights but is used in the lasers that are then used to produce semiconductors,” said Dan Hearsh, a Managing Director at Alix Partners, which works with businesses around the globe.

He says conflict could worsen the semiconductor chip shortage that has led to a global shortage of new vehicles. There are other sources for the raw materials that Russia and Ukraine supply. The problem is in a global market, if one supplier is cut off, other suppliers get the opportunity to raise prices.

The cost of materials doesn’t automatically get passed on to consumers, but if the shortage is long and severe enough that automakers decide to or are forced to make fewer vehicles the prices for vehicles would go up.

“We are currently expecting something like 86 million vehicles to be produced globally this year. This could take a bit off that number. That could result in higher prices or at least a longer time before prices return to normal,” said Hearsh.

Douglas says it is honest advice to tell vehicle shoppers, it may be in their interest to shop earlier than they were used to pre-pandemic.