The war in Ukraine has cost many lives, and has forced millions to flee their homes. Without minimizing this tragedy, we can also note the massive economic hardships it is causing. Forecasting firm LMC Automotive reports that the German auto industry has been especially hard-hit.
At the beginning of March, following Russia’s invasion of Ukraine, almost all automotive production in the two countries quickly came to a halt. Before the war, Russia was the third-largest producer of light vehicles in the European market (behind Germany and Spain). It manufactured almost 1.5 million vehicles in 2021. Ukraine had a much smaller vehicle assembly industry—just 7,000 units were built last year, according to LMC Automotive.
Shortages of components made in Russia and Ukraine have had an even wider impact. Several automakers have been forced to shut down production lines in Europe, and most of the closures have affected German OEMs. LMC estimates that German automakers will lose some 150,000 units of production in the month of March.
German OEMs rely heavily on components manufactured in various Eastern European countries. Ukraine is home to a number of suppliers of wiring harnesses—critical components for all vehicles, but particularly for EVs.
LMC reports that automakers are already making progress in securing new supply chains. The Volkswagen Group has already announced that it is obtaining more components from suppliers in Romania and Hungary, and outside of Europe. “Amazingly, several Ukrainian suppliers are continuing to produce in small volumes, although the sustainability of this supply remains a risk,” write LMC’s analysts. “Nevertheless, the disruption to German output due to wiring harness shortages seems increasingly likely to recede in April.”
Source: LMC Automotive