Due to the Russian-Ukrainian war, automotive factories currently located in Russia have shut down successively and stopped importing vehicles, TrendForce asserts. In addition, Russia has stated that if foreign-funded enterprises choose to permanently suspend business or withdraw from the market during this period, the Russian government will nationalize their business assets. Most automotive brands have factories in Russia and now face the dual pressures of international public opinion and corporate losses. According to TrendForce investigations, after Renault-Nissan acquired the Russian brand LADA, its market share reached 32%, making it the largest automotive brand in Russia followed by Hyundai-Kia at 23% and Volkswagen at 12%.
According to TrendForce, since Renault is the largest shareholder of local automaker AVTOVAZ and Russia is the company’s second largest market, whether AVTOVAZ is nationalized or sales are lost, the overall impact on Renault cannot be underestimated. In addition, even if production can continue, the depreciation of the ruble will greatly increase the cost of importing components.
Soaring costs not conducive to automotive industry recovery
The large number of components and the long supply chain inherent in the automotive industry makes mitigating geopolitical risk difficult. Almost all international or regional events will affect the normal operation of this industry. The Russian-Ukrainian war will not only affect automaker assets, supply chains, sales, and revenue in Russia and around the world in the short term but, in the long term, geopolitics will influence business planning, competiveness, and technology options. More broadly, geopolitical and economic conflicts are derailing automakers’ plans to recover from the pandemic and chip shortages.
According to TrendForce, there are three major factors impeding the recovery of the automotive industry and these factors will further affect automobile sales in 2022. First, the production of vehicle components in Ukraine has halted, affecting the production of complete vehicles. Volkswagen indicated that it intends to move production capacity to North America and China due to the shortage of vehicle wiring harnesses. Second, Russia produces various upstream raw materials such as nickel and palladium for vehicle manufacturing. Due to supply constraints, various costs have risen sharply and some car manufacturers have begun to increase the price of complete vehicles. Third, inflationary pressures have risen sharply, leading to rising costs of living and a reduction of consumer spending power.